Option Flow Recap March 31st

Thematic / Macro

EWJ - 40,000 June $9 puts were bought for $0.16

XLE - 36,500 September $72 puts were sold at $2.40

Consumer

F - 30,000 January $12.50 calls were bought at $3.25

M - 7,600 April $25 calls were bought for $0.24

KO - January '12 $65/$75 call spreads traded 10,500 x 31,500 and collected $2.20

Energy

SD - 4,000 April $13 calls were bought at $0.46

COP - 3,400 April $75 calls were rolled into the May $80 calls at $2.60

NE - 3,300 April $45 puts were bought at $0.87

BP - 4,000 April $46 calls were bought at $0.31

Industrials / Materials

CCJ - 3,090 January $35 calls were sold at $2.45

AA - 2,800 July $16 puts were bought at $0.58

NEM - 2,600 April/May $55 call spread was bought for $1.15

SLW - 2,500 April $48 calls were bought for $0.60

Financials

WFC - 9,000 January $35 calls were sold at $1.84

V - 2,500 April $80 calls were sold at $0.10

Healthcare

CFN - 5,000 May $30 calls were sold at $0.45

JNJ - 5,000 January $47.5 puts were sold at $0.86

*Special thanks to Flotilla Partners, Option Radar, BMO Capital, MEB Options, LiveVolPro, CBOE, Option Monster, and all of the options desks and traders we work with to provide the option flow!

No position at this time. Position declarations are believed to be accurate at time of writing but may change at any time and without notice.

Song of the Day: Radiohead - Codex

Calvin & Hobbes Explains Corporate America To You . . .

Saw this on The Big Picture and thought I'd pass it along.

Wal-Mart CEO Bill Simon expects inflation

Wal-Mart CEO Bill Simon expects inflation - USATODAY.com

"Every single retailer has and is paying more for the items they sell, and retailers will be passing some of these costs along," Long says. "Except for fuel costs, U.S. consumers haven't seen much in the way of inflation for almost a decade, so a broad-based increase in prices will be unprecedented in recent memory."

No position at this time. Position declarations are believed to be accurate at time of writing but may change at any time and without notice.

California Estate Sold for $100 Million - WSJ.com

California Estate Sold for $100 Million - WSJ.com

"A Russian billionaire investor paid $100 million for a French chateau-style mansion in Silicon Valley, marking the highest known price paid for a single-family home in the U.S."

How the 2011 Japan Tsunami Happened

Faber Expects QE3 From Fed 'But Not Right Away'

Song of the Day: Bibio Anything New

Option Flow Recap March 30th

Thematic / Macro

SPY SPDR S&P 500 ETF buyer 12,600 May 130 puts for 2.31

IWM iShares Russell 2000 Index (ETF) – An investor bought 26,000 April 75 puts for $0.16.

EWJ iShares MSCI Japan Index  – 20,000 September 10 puts were bought for $0.59.

XLF Financial Select Sector SPDR (ETF) – 20,000 January 16 puts were bought for $1.22.

EEM iShares MSCI Emerging Markets Indx (ETF) - seller 12,500 April 49 calls at 47 and then a buyer 6,000 Jun 46 puts for 1.29

more after the jump: 

A Kid’s Game: The Story of Online Poker

Very interesting stuff.... lot of similarities to trading.  Hat tip to our newest trader Grant for pointing this out!

Scientists find physical clutter negatively affects your ability to focus, process information

Scientists find physical clutter negatively affects your ability to focus, process information | Unclutterer


very interesting and directly applies to trading.... going to clean my desk now....


"When your environment is cluttered, the chaos restricts your ability to focus. The clutter also limits your brain’s ability to process information. Clutter makes you distracted and unable to process information as well as you do in an uncluttered, organized, and serene environment."

How to Size Up the Risk of Fraud in Hedge Funds

How to Size Up the Risk of Fraud in Hedge Funds - WSJ.com

Great read in the journal today as risk management is focused on more now than ever.

Obama Outlines Energy Plan

Obama Outlines Energy Plan - WSJ.com: "'There are no quick fixes.…And we will keep on being a victim to shifts in the oil market until we get finally serious about a long-term policy for a secure, affordable energy future,' Mr. Obama said Wednesday at Georgetown University."

Seeing lots of bullish options action in the energy space.

Options 101: The calendar

The calendar or time spread is a position with options in two different expiration months, with both options being calls or puts. Both calls or puts will have the same strike price. Calendars involve buying an option in one expiration month and selling an option in another option with a different expiration. A long calendar is buying an option in the back month and selling an option in the front month. A short calendar is selling an option in the back month and buying an option in the front month.

Calendars maximize their value when the stock is at the strike price of the options, and the front month option is expiring. Calendars have their minimum value when the stock is very far away from the stock price of the options. Therefore, if you buy a calendar, you want the underlying stock price to be at the strike price at expiration. If you sell a calendar, you want the underlying stock price to be as far away as possible from the strike price at expiration.

The delta and gamma of a calendar depends on where the underlying stock price is relative to the strike price of the options.

Similar to calendars, a time spread with different exercise prices is a diagonal spread.

Deep in the Amazon.com, Inc. - High in the CLOUD - AMZN

The big news today was Amazon's announcement about its cloud. Traders spent approximately $2mm on Amazon.com (AMZN) options today to accumulate a net of 244k deltas, as the stock was up $5.27 or 3.1% today at the close. It ran right up against its 50 day moving average, which is shown as the red line below. Check out daytradenumbers for all your important price levels.

Courtesy: Livevolpro.com

No complex spread trades stood out on the tape, but i will point out that the skew is slanted toward downside risk, opening the door for a risk reversal type spread where a trader might sell put premium and buy comparatively cheaper call premium. If you are bullish after today's big news, then you might be inclined to try a spread like this.

No position at this time. Position declarations are believed to be accurate at time of writing but may change at any time and without notice.

Song of the Day: Justice - Civilization Original Version

Electronic music lovers everywhere are going nuts for French electro-house duo Justice.  Check out their newest tune "Civilization". The single officially drops April 4 via Ed Banger records, with a full album planned for later this year

Option Flow Recap March 29th

Thematic / Macro

SPY SPDR S&P 500 ETF – 30,000 of the September 144 calls were sold to buy 30,000 of the September 128 / 120 put spreads for $1.00. An also investor traded 10,000 of the May 131 reverse conversion for $0.04 over.

EEM iShares MSCI Emerging Markets Indx (ETF) - buyer 24,500 April 49 calls for 25 & 18,842 April 49 calls for 33

more after the jump: 

Crispin Odey on Agricultural Commodities & Farming

Great post by Market Folly outlining Crispin Odey's view on Agricultural Commodities & Farming.  You can read the whole this here: Crispin Odey on Agricultural Commodities & Farming ~ market folly


here is a snip-it: 


"Over ten years China's urban incomes have risen threefold; their agricultural incomes have doubled. If you believe like I do that China's growth will not falter until their current account deficit goes negative... The corollary of all of this is of course that the cost of living is rising for the developing world at an alarming rate. Most of these countries exacerbate their problems by subsidising food prices. Investors must expect that revolutions, sparked by bread riots, will be part of their diet, for as long as China's demand continues to grow."

Man vs. Machine on Wall Street: How Computers Beat the Market

Man vs. Machine on Wall Street: How Computers Beat the Market - Yahoo! Finance: "Wall Street, meet your post-human future. Uber-'quant' Cliff Asness bets that his high-speed computers and trading models can churn billions of dollars in profits in booms and busts alike. But can artificial intelligence really out-smart the market? "

interesting read but if they are only getting 20-30% a year they aren't even close to beating all human traders....

End-of-Quarter Effect

End-of-Quarter Effect - CXO Advisory


Great article from CXO Advisory that attempts to answer a few questions.  Does the U.S. stock market offer a predictable pattern of returns around the ends of calendar quarters? Do funds deploy cash to bid stocks up at quarter ends to boost portfolio values at the end of reporting periods (with subsequent reversals)? Or, do they sell stocks to raise cash for fund redemptions?

Where are all the marijuana millionaires?

Where are all the marijuana millionaires? - Mar. 29, 2011

The Marijuana fast money business isn't as easy as many pot heads thought.  "I made more money doing concrete," says Brown. A former construction worker and oil rig roughneck.

Song of the Day: Ratatat - Drugs

RATATAT - DRUGS

Ratatat - Drugs (Nguzunguzu Remix)

Option Flow Recap March 28th

Macro / Thematic

UUP PowerShares DB US Dollar Index Bullish – Bullish play on the dollar with 5000 September 23 calls bought for $0.29

 more after the jump

Trade of the Day: Ensco May $60/$55 strangles 5,000x

The Trade

A trader bought 5,000 May $60 calls at $2.35 and bought 5,000 May $55 puts at $1.90 for a debit of $4.25 or $2,125,000.

Risk/Reward

As you can see from the graph above, the spread has limited risk and unlimited profit potential in both directions. The max risk is the debit. The two break even underlying stock levels are $50.75 and $64.25. The spread profits if the underlying stock price is below $50.75 or higher than $64.25 by May expiration. The long strangle profits from a large move in the underlying and an increase in implied volatility. Since the spread is done for a debit, the passage of time hurts the spread.

The lines shown are the two break even prices at expiration. The 52-week range for ESV is a low of $33.33 and a high of $58.78. ESV traded 15,043 contracts today compared to average daily volume of 5,745.

Ensco is a global offshore contract drilling company. The Company's business operates in four segments: Deepwater, Asia Pacific, Europe and Africa and North and South America.

No position at this time. Position declarations are believed to be accurate at time of writing but may change at any time and without notice.

Song of the Day: P. Diddy - Coming Home

Vegas was fun but I'm glad to be home.  Enjoy!

11 Goal Hacks: How to Achieve Anything — PsyBlog

11 Goal Hacks: How to Achieve Anything — PsyBlog

Good post that directly applies to traders

Freakonomics » Should High-Frequency Trading Be Banned? One Nobel Winner Thinks So

Freakonomics » Should High-Frequency Trading Be Banned? One Nobel Winner Thinks So

also read: 

Observations on the Evolution of Economic Policies

Documentary Archives: NOVA Mind Over Money

We wanted to start sharing our love of documentaries with readers of the blog. We'll be linking to some more of our favorites that we've seen if readers enjoy it. Let us know in the comments section!

This is just the first chapter. You can get the rest here.

Watch the full episode. See more NOVA.

No position at this time. Position declarations are believed to be accurate at time of writing but may change at any time and without notice.

Trade of the day: Bristol-Myers Squib Co.

Today's notable action comes fromBristol Myers Squibb Co. The company received approval for a new drug that has garnered a lot of attention. This seemingly led to an accumulation of approximately 1mm net deltas across calls and puts today in BMY. The stock was active on almost 4 times its normal volume.

Courtesy: LivevolPro

Traders pushed the stock higher today - so high in fact, that it touched some major long term resistance, before closing up 86c or about 3.3%. A break above that $28 level could constitute a major breakout for the stock, which you can see below on the weekly chart from freestockcharts.com. Interestingly enough, the push up comes with some bearish divergence on the MACD.

 

A look at a second chart, below, shows us a more short term perspective that also integrates a look at IV30, which spiked with a rapid drop in the share price. I searched through the prior days time and sales, but didn't see anything that was overtly suspicious in the way of order flow, although a large call spread (4k contracts) did go off several days ago. Really could just be lucky timing though.

Courtesy: LivevolPro

 Taking a look at the skew, there isn't anything too out of the ordinary here, but a trader looking for a break to the upside that is unwilling to take much risk on the downside might look to pickup some cheap out of the money calls. The IV isn't juiced up enough for me to get very excited about selling premium to take augment any play on direction here. In fact, it might not be bad choice to just be outright long gamma.

Courtesy: LivevolPro

 At the risk of sounding like a broken record, this one will be another worth keeping an eye on as the bulls will certainly try to test that $28 resistance in the future. If they fail, it will be key to see how the stock handles $25 and perhaps it might try to fill its gap at around $23.


No position at this time. Position declarations are believed to be accurate at time of writing but may change at any time and without notice.

Song of the Day: Miike Snow - Silvia (Roboberget Remix)

Trade of the Day: EBIX

Lots of exciting action in (EBIX) Ebix, Inc. for those of you that like to live (or die) by the seat of your pants. Seemingly a negative story on SeekingAlpha.com caused the stock to plunge, which the company consequently responded to here. 

Who to believe? Only price my friends. Only price. What else matters?

Let's take a look at the gory details after the jump!

Option Flow Recap March 24th

Macro / Thematic

Financial Select Sector SPDR (ETF) XLF - May 15/19 strangle sold @ $0.21 6,886x

 more after the jump

CBOE update on some risk management developments

hat tip to the MEB options desk for this: 

1.  CBOE GOLD ETF VOLATILITY INDEX – GVZ – NEW FUTURES AND OPTIONS

Interest in gold investments recently has surged as investors seek perceived “safe haven” investments, and the price of gold recently rose above a record $1447 per ounce.  Futures on the CBOE Gold ETF Volatility Index (GVZ) are scheduled to launch tomorrow March 25, and the launch GVZ options is expected in upcoming weeks.

www.cboe.com/GVZ

2.  NEW SKEW INDEX and PERCEIVED RISK OF “BLACK SWAN” EVENTS

Last month CBOE introduced the CBOE S&P 500^® SKEW Index (ticker symbol: SKEW), a benchmark measure of the perceived risk of extreme negative moves — often referred to as "tail risk" or a "black swan" event — in U.S. equity markets.

The year-to-date high for the SKEW Index was 136.43 on February 18, 2011, and in recent days the SKEW Index was near 121.

www.cboe.com/SKEW

3.      RECORD VOLUME DAY FOR VIX OPTIONS AND FUTURES

March 15, 2011, was a record volume day for –

-- options on the CBOE Volatility Index^® (VIX^®) with a reported 1,038,002 contracts, and

-- VIX futures with a reported 97,337 contracts traded

www.cboe.com/VIX

4.  ANNUALIZED RETURNS FOR SELECT INDEXES OVER THE 20-YEAR TIME PERIOD ENDING FEB. 28, 2011

Investors use options on the S&P 500^® Index(SPX^SM) and other securities to manage portfolio returns and risks.  Below are 20-year performance numbers for key benchmark indexes.

10.3%               PUT - CBOE S&P 500 PutWrite Index                 www.cboe.com/PUT

9.9%                 BXY - CBOE S&P 500 2% OTM BuyWrite Index  www.cboe.com/BXY

9.0%                 BXM - CBOE S&P 500 BuyWrite Index              www.cboe.com/BXM

8.8%                 SPTR - S&P 500 Total Return Index

6.5%                 CLL - CBOE S&P 500 95-110 Collar Index            www.cboe.com/CLL

www.cboe.com/benchmarks

5.  STANDARD DEVIATIONS FOR SELECT INDEXES OVER THE 20-YEAR TIME PERIOD ENDING FEB. 28, 2011

10.2%               PUT - CBOE S&P 500 PutWrite Index

10.7%               BXM - CBOE S&P 500 BuyWrite Index

10.7%               CLL - CBOE S&P 500 95-110 Collar Index

12.4%               BXY - CBOE S&P 500 2% OTM BuyWrite

15.0%               SPTR - S&P 500 Total Return Index

www.cboe.com/benchmarks

No position at this time. Position declarations are believed to be accurate at time of writing but may change at any time and without notice.

What Puts You Over The Top To Become a Winner? It Is The Mind

I love watching, researching, and studying successful people because they understand what it takes to be truly great.  Weather you're trying to become a better trader, athlete and/or person I think you can learn something from this video on Arnold.

If you know of any good videos you'd like to share put the link in the comments section.  

Option Flow Recap March 23rd

Macro / Thematic

EWJ iShares MSCI Japan Index (ETF) – 100,000 April 11 calls were sold at $0.08. First day in a while we haven't seen a bullish print in EWJ.

XOP SPDR S&P Oil & Gas Explore & Prod.  – 7000 May 60 puts were purchased for $2.25; over 15,000 traded on the day, they were all bought to open.

 more after the jump

Trade of the Day: PNC Financial April $60/$57.50 bull reversals 2,000x

The Trade

A trader sold 2,000 April $57.50 puts at $0.65 and bought 2,000 April $60 calls at $1.93 for a debit of $1.28 or $256,000.

Risk/Reward

As you can see from the graph above, the bull reversal has unlimited risk to zero and unlimited profit potential. The max risk is being put the stock if the underlying is trading below $52.50 before April expiration. The trader sold the puts to partially finance the purchase of the calls. The break even price level at April expiration is $61.28. PNC closed today at $61.27.

The line shown is the break even price level. The 52-week range is a low of $49.43 and a high of $70.45. PNC traded 8,630 contracts today compared to average daily volume of 7,209. PNC will report earnings on April 21st and its dividend is expected on April 12th.

The PNC Financial Services Group, Inc. is a diversified financial service company. The Company is engaged in retail banking, corporate and institutional banking, asset management, residential mortgage banking and global investment servicing, providing many of its products and services nationally and others in its primary geographic markets.

No position at this time. Position declarations are believed to be accurate at time of writing but may change at any time and without notice.

Traxis Partners' Biggs Interview About U.S. Stocks

Option Flow Recap March 22

Macro / Thematic

XLI Industrial SPDR (ETF) - A total of 50,000 June 36 / 32 put spreads were bought today for ~$1.00.

EWJ iShares MSCI Japan Index (ETF) - 20,000 April 10 puts were sold at $0.18.

read more after the jump

Song of the Day: Darren Emmerson 2011 Spring Mix

HEAT!

DETONE SPRING DJ MIX 2011 :: Download at DarrenEmerson.com by Darren Emerson

No position at this time. Position declarations are believed to be accurate at time of writing but may change at any time and without notice.

Song of the Day: Cold War Kids - We Use To Vacation

Cold War Kids - We Use To Vacation

Traders using Twitter - do you care if anyone follows you?

I found some intriguing thoughts listening to one of my favorite podcasts today at Freakonomics.

Option Flow Recap & Chart Review March 21

Click on the company name to see the chart. If you have any questions or suggestions on how to make the blog better please let us know. 

Macro / Thematic

EWJ iShares MSCI Japan Index (ETF) - 100,000 April 8 Puts were sold at $0.03. *Note: remember all of that EWJ action we reported back on the 15? Those risk reversals are paying off big time so far. 

Read more after the jump

Options 101: The Bull Call Spread

The bull call spread is a bullish strategy used by traders who want to capitalize on an increase in the price of the underlying stock. The bull vertical consists of buying a lower strike call and selling a higher strike call. The call options will have the same expiration. The total cost of the spread is the debit, or premium paid, which is the max risk. The max profit potential is the difference between the strike prices minus the debit.

read more after the jump:

Trade of the Day: Leap Wireless bull vertical risk reversal

The Trade

A trader sold 7,500 Jan '12 $12.50 puts at $1.70 to finance the $15/20 call spread 7,500x at $1.45 for a net credit of $0.25 or $187,500. The trader bought 7,500 of the Jan '12 $15 calls at $2.10 and sold 7,500 of the Jan '12 $20 calls at $0.65.

Risk/Reward

As you can see from the graph above, the bull vertical risk reversal has limited risk to zero and limited profit potential. Since the spread is naked short puts, the max risk is being put the stock if the underlying is trading below $12.50 before Jan '12 expiration. The max profit potential occurs at an underlying stock price of $20 at expiration. Since this spread is done for a net credit, the trader keeps the credit if the underlying trades above $12.25 at expiration.

The line shown is the lower break even price level. The 52-week range is a low of $9.51 and a high of $19.11. LEAP traded 33,072 contracts today compared to average daily volume of 2,049.

Leap Wireless International, Inc. is a wireless communications carrier that offers digital wireless services in the United States under the Cricket brand. Its Cricket service offerings provide customers with unlimited wireless services for a flat rate without requiring a fixed-term contract or a credit check. LEAP closed today +1.91 or 15.73% following the AT&T/T-Mobile deal.

No position at this time. Position declarations are believed to be accurate at time of writing but may change at any time and without notice.

The Fab Five

Why Did Warren Buffett Buy Lubrizol? Pricing Power

When Warren Buffett released his 2010 annual Berkshire Hathaway letter, much was made of the fact that the legendary value investor was on the prowl for large acquisitions. His quote, "our elephant gun has been reloaded, and my trigger finger is itchy," sent analysts scrounging for potential acquisition targets. Well, we've found the smoking gun.





read more after the jump...

Chart Review / Trade Ideas.

ASIA AsiaInfo-Linkage, Inc.- Long above 21.20ish. Short set up possible also but long bias. Watch volume to confirm. 

SYMC Symantec Corporation  - Stalking short.  Looking for a gap fill @ 16ish or a test of its 200 DMA.

MR Mindray Medical International Ltd - This had been a great range trade.  Could break in either direction but in the mean time play the range. 

WMGI Wright Medical Group, Inc. - Still on my watch list. Stalking long. 

SNTS Santarus, Inc. - aggressive long.  Stops must be kept very tight. 

MMR McMoRan Exploration Co. - Coiling up

AAPL Apple Inc. - Short is working that was suggested last week.  If you cover half here at the 100 

DMA you can let the rest run for a free trade. 

FCEL FuelCell Energy, Inc.  - Aggrisive trade idea.  Might need more time to base. 

CATY Cathay General Bancorp - Short trade looks like it has room to 15ish.  Stock is below is 100 

DMA.  Careful with shorts as the market is due for a bounce.

SDS ProShares UltraShort S&P500 (ETF) - Retesting its 20 EMA could set up for a long entry.  

There are some great option plays here. 

TLT iShares Barclays 20+ Yr Treas.Bond (ETF) - initial support at its 20 EMA.  I would target the 200 

DMA. 

VXX iPath S&P 500 VIX Short-Term Futures ETN - Starting to trend up.  Lets see if it can hold. I'd 

actually prefer to it test 28ish again by April for the "sell in May and go away" trade.  Where you'd 

want to be long VXX. 

EDZ Direxion Daily Emr Mkts Bear 3x Shs(ETF) - Watching this for a long and as a clue to where 

the market is headed next

FCX Freeport-McMoRan Copper & Gold Inc. - This was a great tell that the market was going to 

roll over.  Is it telling us now we're going to bounce? Broke the down trend and currently testing its 

50 EMA.  Watch this closely. 

GS Goldman Sachs Group, Inc. There's a lot of bullish talk about the banks right now after the FED 

announcement but the chart isn't screaming buy yet.  GS did bounce off its 200 DMA but only a bounce

trade as of now. 

C Citigroup Inc. - Stuck between its 100 and 200 DMA.

BAC Bank of America Corporation - In a wedge and holding its 200 DMA so far. 

No position at this time. Position declarations are believed to be accurate at time of writing but may change at any time and without notice.

Option Flow Recap & Chart Review March 18

Click on the company name to see the chart. If you have any questions or suggestions on how to make the blog better please let us know. 




Macro / Thematic

VIX  S&P 500 VIX Futures – 3550 July 19 puts were bought for $0.90, to open.

EEM iShares MSCI Emerging Markets Indx (ETF) - April 40/44 bull put spread for $0.53 credit 
trades 56600x. 

FXI iShares FTSE/Xinhua China 25 Index (ETF) - 4700 April 44 calls were rolled to the 
May 45 call.  Taking profits and staying bullish.

SLV iShares Silver Trust (ETF) - 3756 April 31/38 risk reversals trade for even money.  Very
 bullish trade as this trader either buys SLV at 31 (which is above its 50 DMA) or starts making
 pure profit above 38. 

read more after the jump... .