Showing posts with label morning note. Show all posts
Showing posts with label morning note. Show all posts
Wednesday, October 19, 2011
Morning Note
October 19, 2011
Equity futures are trading mixed to fair value. European markets are in positive territory, reacting to the volatility in the US in the last hour of trading: US markets first saw a knee-jerk rally on the Guardian report that an agreement on a €2T rescue fund had been reached, and then pulled back on the realization that the €2T represented the impact of leverage, and not an increase in the absolute size, and then subsequent headlines that the €2T figure was "totaly wrong". Underperformance in Nasdaq futures reflects Apple's (AAPL) earnings miss, while S&P and Dow futures are above fair value.
Bullish sentiment increases to 35.8% from 34.4% in the latest US Investor's Intelligence poll. Bearish sentiment decreases to 41.0% from 46.3%
Those expecting a market correction increases to 23.2% from 19.3%
Friday, October 14, 2011
Morning Note Oct 14
October 14, 2011
Equity futures are trading above fair value ahead of today's Oct Michigan Consumer Sentiment at 09:55 ET and as G20 Finance ministers are meeting in Paris today to find a solution to the debt crisis. Greece remains the central focus but fears of a spread to other Eurozone countries and banks remains high.
Thursday, October 13, 2011
Morning Note
October 13, 2011
Equity futures are trading lower as European indices trend down after having opened higher. Google (GOOG) is expected to report after the close. JPMorgan Chase (JPM) reports Q3 EPS $1.02
Philadelphia Fed President Charles Plosser speaks at 11:45 ET
Treasury Auction of 30-yr bonds at 13:00 ET.
Tuesday, October 11, 2011
Morning Note Oct 11th
October 11, 2011
US equity futures are following European markets lower as ECB's Trichet reiterated a sense of urgency in regard to dealing with the Eurozone Sovereign debt crisis in order to avoid contagion. The Slovakian vote on approving changes to the EFSF rescue fund is expected at ~7:00 ET is looking less likely to be approved though there are reports that the parliament can put the ratification to repeated ballot once a political agreement with the opposition is in place. Earnings season unofficially kicks off with Alcoa (AA) after the close.
EU/IMF/ECB inspectors say Greece will miss 2011 target, says Greek 2011 fiscal target no longer within reach.
Sep NFIB Small Business Index 88.9 vs. 88.1 in August
Friday, October 7, 2011
Morning Note Oct 7th
October 7, 2011
US equity futures are trading lower ahead of September unemployment data due at 8:30 ET
Lipper reports equity fund outflows of ($5.9B) in w/e 5-Oct vs outflows of ($5.9B) in w/e 28-September. Ex-ETFs, outflows were ($638M) in w/e 5-Oct vs outflows of ($1.7B) in w/e 28-Sep.
Tuesday, October 4, 2011
Morning Note Oct 4th
October 4, 2011
US equity futures are lower as continuing concerns over contagion risk to the EU debt crisis, capital needs in the banking sector and slowing global growth concerns all weigh on investor sentiment. Attention will turn to Fed Chairman Bernanke's testimony on the economy to Congress today at 10:00 ET.
Monday, October 3, 2011
Morning Note Oct 3rd
October 3, 2011
US equity futures are off the worst levels of the morning following Asia and Europe lower as continuing concerns over the banking sector and slowing global growth are once again highlighted after Greece admitted over the weekend it would miss it's Fiscal targets. With no resolution in sight to the EU debt crisis, anxiety continues to weigh on markets.
Friday, September 30, 2011
Morning Note Sept 30th
US equity futures are lower following Asia and Europe lower after slowing manufacturing numbers in China and weaker retail sales figures out of Germanyweigh on the markets.
Lipper reports equity fund outflows of ($5.9B) in w/e 28-Sep vs outflows of ($1.6B) in w/e 21-September. Ex-ETFs, outflows were ($1.7B) in w/e 28-Sep vs outflows of ($171M) in w/e 21-September.
Tuesday, September 13, 2011
Morning Note Sept 13
September 13, 2011
US equity futures are near fair value having rallied back from early morning lows. European markets were initially higher but then turned negative as hopes for China's interest in buying Italian bonds began to fade and attention turned once again to the banking sector as BNP Paribas (BNP.FP) denied they had liquidity problems.
Wednesday, September 7, 2011
Morning Note Sept 7th
September 7, 2011
US equity futures are all trading higher following higher openings across Asia and Europe, which got an additional boost after the constitutional court in Germany rejected lawsuits aimed at blocking participation in euro zone bailouts.
II Data: Bullish sentiment declines to 38.7% from 40.9% in the latest US Investor's Intelligence poll. Bearish sentiment increases to 37.6% from 36.6%. Those expecting a market correction increases to 23.7% from 22.5%
Tuesday, September 6, 2011
Morning Note Sept 6th
September 6, 2011
US Equity futures are trading lower relative to fair value, playing catch-up after yesterday's sharp selloff in Europe as global growth worries and heightened concern in dealing with the region's sovereign debt crisis continue to take center stage. Attention will focus later today on August growth in the service sector due at 10:00 ET.
Friday, September 2, 2011
Morning Note Sept 2nd
September 2, 2011
US Equity futures are trading lower relative to fair value following yesterday's selloff, which sparked corresponding weakness in Asia and Europe. Today's key will be the Aug employment data at 08:30ET that is expected to show an increase of 75k jobs (BMO expects closer to +35k), yet down from +117K in July.
European Commission, ECB and IMF Mission to Greece has temporarily left Athens to allow the authorities to complete technical work, among other things, related to the 2012 budget and growth-enhancing structural reforms. A joint EC/ECB/IMF team has been discussing recent economic developments and reviewing policy implementation in the context of the fifth review ofGreece's economic program. The mission has made good progress. The mission expects to return to Athens by mid-Sep, when we expect the Greek authorities to have completed the technical work, to continue discussions on policies needed to complete the review.
Fed reports balance sheet assets of $2.857T on Wednesday, ($5.76B) w/w and +$552B y/y
Holdings of US Treasury securities were $1.65T on 31-Aug, +$3.7B w/w and +$865.8B y/y.
Holdings of mortgage-backed securities were $884.9B on 31-Aug, ($7.4B) w/w and ($218.2B) y/y.
Holdings of federal agency debt securities were $109.8B on 31-Aug, unch. w/w and ($46.7B) y/y.
Libor fixings
- Overnight Libor: Dollar: 0.141% vs prior 0.142% ; Sterling: 0.581% vs prior 0.581%; Euro: 0.836% vs prior 0.838%
- 1-month Libor: Dollar: 0.222% vs prior 0.222% ; Sterling: 0.660% vs prior 0.660%; Euro: 1.298% vs prior 1.298%
- 3-month Libor: Dollar: 0.331% vs prior 0.329% ; Sterling: 0.889% vs prior 0.888%; Euro: 1.483% vs prior 1.484%
WTI ($0.73) at $88.20
Natural gas ($0.024) at $4.026
Spot Gold +$26.20 at $1851.65
10-yr yield 2.13%
30-yr yield 3.52%
Asian Markets
Asian markets followed Wall Street down this morning as investors awaited US jobs data. Oil and gas stocks sent Taiwan down. Financials, however, powered the market to a flat finish when the island’s banking regulator said it would make it easier for them to invest in China. China fell; turnover was the lowest in more than a year as investors worried about more policy tightening. In low volumes, Japan fell on profit-taking after a six-day winning streak. Banks and miners led Australia down. Hong Kong fell. The yen is trading at 76.79 to the US dollar.
European Markets
European equity markets snapped a four day winning streak, declining from the open following weaker markets in Asia and a disappointing close in the US, with market participants focusing on the periphery on reports that Greece will miss its budget deficit target in 2011. With little significant regional economic or corporate release, indices extended initial fall before modestly paring losses. The pound and the euro are trading at $1.6194 and $1.4241 respectively. The pound was pressured by UK Construction PMI data with its weakest reading since Dec 2010 UK Aug Construction PMI 52.6 vs consensus 52.6, prior 53.5. Eurozone July PPI +6.1% y/y vs consensus +6.1% and prior +5.9%. Eurozone July PPI +0.5% m/m vs consensus +0.5% and prior +0.0%. The pound and the euro are trading at $1.6194 and $1.4241 respectively.
Today's Economic Releases (Eastern Time)
08:30 US Nonfarm Payrolls (Aug); consensus +61K
08:30 US Unemployment Rate (Aug); consensus 9.1%
08:30 US Hourly Earnings (Aug); consensus +0.2%
08:30 US Average Weekly Hours (Aug); consensus 34.3
Today's Key Events (Eastern Time)
—:— Dreamforce ~ Cloud Computing Industry Event
Company Specific News
Earnings
CPB (Campbell Soup reports Q4 EPS $0.43 ex-items vs Reuters $0.38; Reports Q4: Revenues $1.61B vs Reuters $1.57B)
ESL (Esterline Technologies reports Q3 EPS $1.21 cont ops vs Reuters $1.22; Reports Q3: Revenues $409.5M vs Reuters $418.9M)
FLOW (Flow International reports Q1 EPS $0.01 vs Reuters $0.02; Reports Q1: Revenues $60.0M vs Reuters $60.2M)
HRB (H&R Block reports Q1 EPS ($0.37) ex-items vs Reuters ($0.40); Reports Q1: Revenues $267.6M vs Reuters $275.1M)
FNSR (Finisar reports Q1 EPS $0.21 ex-items vs Reuters $0.18; Reports Q1:
Revenues $228.2M vs Reuters $228.4M)
WBC (WABCO Holdings reiterates f11 EPS guidance $4.55-$4.88 v. Reuters $4.75. Reiterates f11 guidance: EPS $4.55-$4.80 vs Reuters $4.75)
ZQK (Quiksilver reports Q3 EPS cont ops $0.06 vs Reuters $0.08; Reports Q3:
Company did not record any pro-forma adjustments for Q3 of fiscal 2011)
Other News
Eurozone sovereign debt crisis
- Italian bonds fall for 10th day as Greek two-year yield climbs to record: Bloomberg reported Italian and Spanish bonds fell and German bunds rose in the wake of higher Spanish unemployment, concerns over Italy's stomach for austerity and worries that US employment figures will highlight the continued lackluster recovery in the labor market. The article also noted that Greek two-year yields soared to a record, approaching 47%, while Italy's 10-year bonds dropped for a 10th day, the longest losing streak since the euro's 1999 introduction.
- Greece denies troika talks break down: The WSJ reported that Greek Finance Minister Evangelos Venizelos said on Friday that Athens must avoid taking further measures that would deepen recession. He also rejected reports of a breakdown in talks with international inspectors after they were suspended earlier amid a dispute over Greece's ability to meet its deficit targets. Venizelos said that talks with the troika were friendly and the suspension had been agreed by common consent. The talks were originally expected to conclude by 5-Sep. The article went on to note that while Greece is blaming the recession for the missed targets, the troika is more concerned about the implementation of policy and is pushing for additional spending cuts.
- Greece, EU/IMF at odds over deficit; pause talks: Reuters also discussed the unexpected pause in talks between Greece and the troika. The article noted that the troika feels that Greece is not pursuing reforms aggressively enough and have in particular criticized the lack of progress on privatizations and on labor and pension reforms. Reuters also cited a source who said that the troika believes that only about 25% of the budget deviation is due to the recession. In addition, the article pointed out that given that there are no Greek government bonds maturing before March next year, the country will not be at immediate risk of default even if it does not receive this month's €8B tranche from the first rescue package as planned.
- Eurozone nearing Greek collateral compromise: Reuters reported that Eurozone governments are moving towards a compromise on the backlash surrounding a bilateral deal that would giveFinland collateral in return for its participation in the next Greek bailout package. The article noted that Ireland's Finance Minister Michael Noonan said that the original deal between Greece andFinland has been scrapped and that a new compromise was being hashed out. Reuters also pointed out that Dutch Finance Minister Jan Kees de Jager, speaking in the Hague, said a solution to the dispute was not far off. However, the article went on to note that contrary to earlier reports, the collateral issue is not officially on the agenda for - - Tuesday's meeting between the finance ministers of the Netherlands, Finland and Germany.
Restaurants in Greece refuse to pay VAT rise: The FT reported that café and restaurant owners are banding together and refusing to pay a 10-point VAT increase. The article pointed out that the increase in the value added tax on the hospitality sector from 13% to 23% is projected to raise €750M over the next year and is part of the latest austerity push underpinning the next Greek bailout package. The paper said that already hit hard by the recession, café and restaurant owners view the VAT rise as the final straw. The finance ministry has said that owners will be fined for tax evasion if they fail to pay the VAT at the increased rate.
- Italy near completion on austerity deal: The FT said that after three weeks of disputes and numerous revisions, Italian finance minister Giulio Tremonti reached a deal with coalition leaders on a compromise austerity package. The article, which also discussed the latest sex scandal-related troubles surrounding Prime Minister Berlusconi, noted that the government's credibility with international investors has been severely undermined.
- ECB steps up pressure on Italy as debt worries grow: Reuters reported that an interview with Italian business daily Il Sole 24 Ore, ECB President Trichet said that Italy's government needs to deliver on its promised austerity package. The article noted that Trichet's comments highlight the mounting concern surrounding Italy's chaotic process in agreeing on measures to bring its public finances under control. Reuters, which like the FT also discussed the latest scandal surrounding Berlusconi, noted that the spread on Italian debt over German bonds widened on Friday to levels not seen since the ECB started buying Italian debt a few weeks ago.
- Economists call on ECB to cut rates: Bloomberg reported that the shadow ECB council said that the ECB should reverse this year's tightening to prevent the Eurozone economy from slipping back into recession. The shadow council expressed concern about a contraction in European manufacturing and plunging business and consumer confidence that suggest that the sharp slowdown in Q2 may spill over to Q3.
- ECB's Coene says crisis heading to 2008/9 level: Reuters reported that ECB Governing Council member Luc Coene said in an interview with the French-language daily newspaper La Libre Belgique published on Friday that while liquidity and confidence problems in Europe are not as severe as they were during the post-Lehman crash, they are heading in that direction. Coene chalked up the concerns to the continued uncertainty surrounding bailout plans, particularly for Greece. Coene went on to downplay the near-term issuance of Eurozone bonds and said that capital increases for banks do not make sense at this point given that the only subscribers to such increases would be governments.
Newspaper Articles / Headlines
Atlantic Wire
- Washington Post closing all suburban offices except for Richmond, VA, and Annapolis, MD
Barron's
- Barron's Weekday Trader is positive on Penn Virginia Resource Partners. Barron's Weekday Trader is positive on PVR citing: Exposure to both coal and natural gas. Dividend yield of 7.6%. Expanding presence in the Marcellus Shale region. Recent pipeline deal with Range Resources (RRC) and a iklihood of additional deals in the near future. Current trading levels around 13x expected distrubable cash flow for 2011.
Boersen Zeitung
- Lufthansa hires bank to sell British Midland
De Tijd
- JC Flowers looking at KBC Groep's Fidea insurance subsidiary. Sources tell De Tijd that first-round interest from insurers was disappointing, and it is possible that Delta Lloyd (DL.NA) and Credit Agricole (ACA.FP) wil drop out of the bidding, leaving Baloise (BALN.VX) as the only insurer in the second round.
- Omega Pharma likely to announce delisting today
Digitimes
- Intel to temporarily discontinue development of MeeGo. Industry sources tell DigiTimes that handset and tablet PC vendors are not adopting the platform, so Intel plans to have its hardware work with Android or Windows Phone next year.
Economic Times
- Reliance Industries (RIL.IN), Siemens (SIE.GR) to bid to install CCTV cameras in Mumbai. A person close to the matter tells the Economic Times that the companies' alliance could lead to a JV.
Financial Times
- FT reports 3 left in the bidding process for GlaxoSmithKline's OTC business. The FT, citing people familiar with the process, reports Bain Capital, Blackstone (BX) and Boehringer Ingelheim, were still in the process.
Giga Om
- Liberty Starz Group will probably end up keeping its streaming rights. The article analyzes the situation and notes or concludes: Netflix (NFLX) never had exclusive rights to Starz's streaming rights. Google (GOOG) and Amazon (AMZN) probably aren't willing to pay for the rights. Starz CEO Chris Albrecht wants to build a network that has solid original programming.
A streaming deal would limit Starz's ability to reach favorable deals with distribution and studio partners
Globe and Mail
- TransCanada applies for permission to cut gas-shipping tolls by 33% on Mainline. The Globe and Mail reports that the company has applied to the National Energy Board. The company plans to cut its depreciation on its Mainline system and raise charges for shipping in Alberta and Ontario. TransCanada has also raised its forecasts for its shipping volumes.
- Shaw Communications to build WiFi network rather than spend C$1B to enter cellphones. The company announced its plan yesterday. In an interview, president Peter Bissonnette calls cellphones an idea that would have produced "a horrible return on a significant investment.”
- Chinese investors backing Enbridge's Northern Gateway pipeline. Sources tell the Globe and Mail that in addition to Sinopec (386.HK), whose investment was already known, MEG Energy (883.HK) has invested in the line. Investing in the line now gives companies cheaper shipping rates and option to purchase equity in the future. Sources say Suncor (SU.CN), Total (FP.FP), and CNPC have also made $10M investments in Northern Gateway. Daewoo international (047050.KS) tried but failed.
Handelsblatt
- Portuguese Prime Minister Pedro Passos Coelho calls for Lufthansa to invest in TAP
Independent
- Kesa Electricals may not be able to sell Comet. Without citing sources, the Independent reports that Opcapita and Hilco may still submit final bids by today's deadline, but the pension liabilties are still a problem. The article says Kesa may have to offer a £150M dowry to a buyer
International Business Times
- AT&T prepares solutions to satisfy antitrust concerns regarding purchase of T-Mobile USA (DTE.GR). People close to the matter tell the International Business Times that AT&T will offer to sell assets and promise to keep T-Mobile's cheap pricing. A former antitrust official notes that while AT&T may be able to easly offload regional assets, national assets can probably only be bought by players like Verizon Wireless (VZ) or Sprint Nextel (S), who are so large that they would spark antitrust issues themselves.
London Times
- Chorion assets being offered at bargain prices. The Times reports that Disney (DIS), Hasbro (HAS), Viacom (VIA), and Entertainment One (ETO.LN) might be interested in the assets, which include rights to Paddington Bear, Mr Men, Noddy, and Agatha Christie's literary estate.
Los Angeles Times
- California politicians not jumping at Amazon.com's jobs offer. The LA Times reports that a government official is also asking Wal-Mart (WMT) about affiliated companies that sell merchandise on Wal-Mart.com but don't collect sales tax on purchases by Californians.
New York Post
- Fortress (FIG), Ocwen Financial (OCN) among bidders for Saxon Mortgage Services. Sources tell the NY Post that bidders would like Morgan Stanley to assume responsibility for any litigation costs that may result from the foreclosure investigations into Saxon.
New York Times
- Federal Housing Finance Agency to sue more than 12 large banks 6-Sep at latest. People briefed on the matter tell the NYT that the suits will seek billions of dollars for misrepresenting the quality of mortgage securities sold in the housing bubble. Sources say the suits will be similar to the one filed in July against UBS (UBSN.VX). Bank of America (BAC), JPMorgan Chase (JPM), Goldman Sachs (GS), and Deutsche Bank (DBK.GR) are the only banks named as targets in the new wave of litigation.
Silicon Alley Insider
- Netflix CEO says Starz accounted for ~8% of domestic Netflix subscribers' viewing; confident renewel money set aside for Starz contract can be used to find other content.Silicon Alley Insider notes Netflix CEO Reed Hastings says Starz accounted for about 8% of domestic viewings and he expected Starz content viewership to further taper down to the 5-6% range in Q1. Hastings is confident contract renewel money can be spent with other content providers to fill the void left by Starz.
Wall Street Journal
- Over past coupe of months. Fed asked Bank of America to explain how it would deal with worsening conditions. People familiar with the situation say BAC responded with a range of options, one of which involved issuing a Merrill Lynch tracking stock, though the article says CEO Brian Moynihan is not expected to charge ahead with the idea. None of the other options appears in the article.
- WSJ is basically positive on Deutsche Telekom. A "Heard on the Street" column says that investors need not panic over the hurdles that Justice is putting in the way of the sale of T-Mobile USA to AT&T (T), because the deal may still be approved, and if it isn't, Deutsche Telekom has other options for the unit.
- WSJ looks at new Bank of New York Mellon CEO Gerald Hassell. The article is a summary, not really breaking much news. Largely citing analysts, it notes that Hassell is not encumbered by the same management-style issues that Robert Kelly was, but his exceptionally long tenure at the bank raises questions about whether he will be able to adapt to a changing world.
FHFA to sue banks for billions over mortgage bonds. The Federal Housing Finance Agency could today file lawsuits seeking billions of dollars in compensation from a dozen large banks for misrepresenting the quality of mortgage bonds they sold during the housing bubble, sources say. The suits will argue that the banks, which include Bank of America (BAC), JPMorgan (JPM), Goldman Sachs (GS) and Deutsche Bank (DB), didn't undertake the due diligence required by law. Fannie Mae (FNMA.OB) and Freddie Mac (FMCC.OB) - and ultimately taxpayers - lost over $30B as a result of the deals.
Fed presses BofA on contingency options. With its potential legal liabilities piling up, Bank of America (BAC) has received a request from the Fed about what it could do if its financial situation worsens. BofA has provided a number of options, including issuing a separate class of shares tied to the performance of Merrill Lynch, the bank's most profitable unit. The move would raise cash but is only theoretical - for now.
Netflix shares plummet after Starz breaks off talks. Liberty Media's (LSTZA) Starz has broken off contract-renewal talks with Netflix (NFLX) over differences in pricing and packaging, saying it will end programming as of March 2012. The move came the day an unpopular Netflix price rise took effect and will deprive the online video service of a key source of newer movies and original Starz shows such as "Spartacus." While Netflix said it will look for alternative programming, industry observers believe a deal could still be struck. Notwithstanding, Netflix shares plunged 8.5% after hours.
AstraZeneca's Crestor no more effective than Lipitor. AstraZeneca's (AZN) blockbuster cholesterol drug Crestor has failed to significantly beat Pfizer's (PFE) Lipitor in a head-to-head study. The result is likely to cap any benefits AstraZeneca might gain after Lipitor loses its patent in November and cheap generics hit the market. However, with full results not due till November 15, RBS notes that while AstraZeneca set a high 0.65% PAV differential to demonstrate "statistical significance," 0.5% might be enough to impress cardiologists.
More gloom expected in jobs report. Employment data for August is due out this morning, with reduced confidence about the economy expected to have caused a slowdown in hiring. Nonfarm payrolls are estimated to have increased by 68,000, sharply down from a 117,000 rise in July. Unemployment is predicted to have held steady at 9.1%, marking 26 out of the last 28 months it has exceeded 9%. The White House said yesterday that it expects the rate to stay above this level into 2012.
AT&T may have to sell 25% of T-Mobile to save deal. AT&T (T) could have to sell up to 25% of T-Mobile's (DTEGY.PK) business, including airwaves and customers, to overcome government antitrust fears about the carriers' tie-up, sources say. While AT&T is preparing for a court fight with the DOJ, it's also formulating an offer to salvage the $39B deal. However, former antitrust enforcer Bob Doyle said it would be difficult to reach a settlement as any divestitures at a national level - which would be to Verizon (VZ) or Sprint (S) - would also raise competition concerns.
Judge quashes Oracle's $1.3B award againt SAP. A U.S. judge has overturned Oracle's (ORCL) $1.3B verdict against SAP for theft of intelletual property, saying that the amount was "grossly excessive" and that the maximum value of the damages proved is just $272M. Oracle can now accept the lower amount or fight for more money at a new trial.
Japan names little-known Jun Azumi as Finance Minister. New Japanese Prime Minister Yoshihiko Noda has appointed Jun Azumi to replace him as Finance Minister. Azumi, a legislator from the earthquake-devastated north east, has apparently not shown much interest in economics and finance in the past, and little is known about his views. However, he is known for his efforts to improve relations between government and opposition parties, so could prove important in helping Noda to push through unpopular tax rises to help pay for post-quake reconstruction.
Greece, Troika talks suspended over further austerity. Discussions between Greece and a delegation from the IMF, EU and ECB have been temporarily halted over the country's deficit target. The government has cut its GDP forecast for the year and now believes the economy will contract 4.5%-5.3%, which means the deficit could exceed 8.5% of GDP compared with a goal of 7.6%. The troika wants yet more austerity, but Greece's finance minister believes the cuts approved in June should be enough - if they're implemented. At stake is an €8B ($11.4B) tranche of Greece's rescue package.
Major exporters bar Syngenta GM grain. Cargill and other major U.S. agribusinesses have increased restrictions on accepting Syngenta's (SYT) popular Agrisure Viptera corn as part of curbs against genetically modified grain not yet approved in major foreign markets such as China and the EU. Archer Daniels Midland (ADM) and Bunge North America (BG) have taken similar actions, which come just weeks before the U.S. harvest, when the corn could enter the market. The grain firms are worried that any trace of unsanctioned biotech products in their shipments could close export markets.
LSE in talks to acquire LCH.Clearnet. The London Stock Exchange (LDNXF.PK) said it is in early talks to buy LCH.Clearnet in a deal that the FT says could value the clearing house at €1B ($1.43B). The discussions pit LSE against market-data firm Markit, while Nasdaq OMX (NDAQ) has also shown interest in the past.
Amazon to California: Jobs for tax reprieve. Amazon (AMZN) has offered to invest in Californian distribution centers and create 7,000 full-time jobs by 2015 in exchange for a reprieve from the state's new Internet sales tax law until 2014. In response, Bill Dombrowski of the California Retailers Association said that while Amazon might hire more people, "how many (jobs) do we lose in bricks and mortar retail by 2014?" Amazon's proposal to California comes as it battles with states around the country over the collection of sales tax.
Research
Bank of America Merrill Lynch: downgraded AGNC, CIM, DX, HTS, IVR, NLY
Credit Suisse: upgraded ODFL, UPS, TD; downgraded CP, FDX
Morgan Stanley: upgraded EDMC; downgraded MMI
Oppenheimer: upgraded LQDT
RW Baird: upgraded ZQK
Ticonderoga: downgraded EV
Options
This morning we screened Put Spread Collars in both high-end and low-end Consumer Names that have posted positive QTD returns, have steep skew based on 25/50 delta put implied vol, offer at least a 10x1 max payout, and where the stock could be called away at least 5% above yesterday’s closing price. We currently like this strategy given the environment of elevated implied vol and steep downside skew.
WYNN – Sell Oct 175 Calls to Buy Oct 145/130 Put Spread for $1.15
(12x1 max net payout; risk stk called away at $175 or 14.5% above cls)
RL – Sell Oct 150 Calls to Buy Oct 130/115 Put Spread for 25c
(39x1 max net payout; risk stk called away at $150 or 8.9% above cls)
PVH – Sell Oct 75 Calls to Buy Oct 62.50/55 Put Spread for 55c
(12.6x1 max net payout; risk stk called away at $75 or 13% above cls)
MCD – Sell Oct 95 Calls to Buy Oct 87.5/82.50 Put Spread for 27c
(17.5x1 max net payout; risk stk called away $95 or 5.5% above cls)
COST – Sell Oct 85 Calls to Buy Oct 77.5/72.50 Put Spread for 40c
(11.5x1 max net payout; risk stk called away at $85 or 7% above cls)
XRT – Sell Oct 52 Calls to Buy Oct 47/43 Put Spread for for 9c
(43x1 max net payout risk ETF called away at $52 or 7.2% above cls)
http://seaofopportunity.blogspot.com/
*Special thanks to Option Radar, BMO Capital, MEB Options, Bloomberg, Reuters, Optionistics, LiveVolPro, CBOE, AMEX, Option Monster, T.O.P. group, 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.
Thursday, September 1, 2011
Morning Note Sept 1st
September 1, 2011
US equity futures are trading lower following European Economic data that generally came out weaker than expected abd begative sovereign debt headlines. The market is awaiting ISM Manufacturing data due at 10:00 ET where consensus of 48.5 suggests contraction which was last seen in Jul 2009.
Spanish T-Bond: Spain treasury sells €3.62B in new 5-yr bond. Bid-to-cover ratio 1.8. Average yield 4.489%
Tuesday, August 30, 2011
Morning Note Aug 30th
August 30, 2011
US equity futures are all trading lower relative to fair value ahead of the August Consumer confidence figures and Fed minutes release at 14:00 ET for clues as to where the Fed's thinking is with respect to further monetary stimulus.
Monday, August 29, 2011
Morning Note Aug 29th
August 29, 2011
US futures continue to trade above fair value and are little changed from earlier updates on what is expected to be a lighter than normal trading session. Flooding from Hurricane Irene left many NYC suburbs with limited transportation intoManhattan with some initial loss estimates from the storm in the $7B range.
Thursday, August 25, 2011
Morning Note
August 25, 2011
US equity futures are trading below fair value, though have improved in the past couple of hours. The relative underperformance in Nasdaq futures is due to the resignation of Steve Jobs as CEO of Apple (AAPL). Investors are waiting on the weekly jobless claims data which comes out at 08:30 ET.
Wednesday, August 24, 2011
Morning Note
August 24, 2011
US equity futures are pointing to a lower opening, though are off the lowest levels of the overnight, following yesterday's strong performance. Investors game if QE3 will become a reality or whether, if some other form of stimulus is announced, will it meet heightened market expectations, remains a most pressing question.
Moody's downgrades Japan's sovereign debt rating one notch to Aa3; outlook stable. Moody's cites large budget deficits and rising government debt since 2009.
Bullish sentiment decreases to 40.9% from 46.2% in the latest US Investor's Intelligence poll. Bearish sentiment increases to 33.3% from 23.7%. Those expecting a market correction decreases to 25.8% from 30.1%.
Libor fixings
- Overnight Libor: Dollar: 0.144% vs prior 0.144% ; Sterling: 0.580% vs prior 0.580%; Euro: 0.840% vs prior 0.835%
- 1-month Libor: Dollar: 0.219% vs prior 0.218% ; Sterling: 0.655% vs prior 0.655%; Euro: 1.295% vs prior 1.294%
- 3-month Libor: Dollar: 0.314% vs prior 0.312% ; Sterling: 0.880% vs prior 0.877%; Euro: 1.480% vs prior 1.480%
September WTI crude ($0.10) to $85.34
Natural gas +$0.018 to $4.011
Gold $14.23 to $1842.85
10-year yield 2.1320%
30-year yield 3.4564%
Asian Markets
Asian markets fell today after Moody’s downgraded Japan’s sovereign debt.
Australia finished flat after giving up early gains spurred by banks, miners, and some pleasant earnings news. But most investors waited to hear BHP Billiton’s (BHP.AU) results post-close, which missed expectations.
Megabanks fell on the Moody's downgrade, though Moody’s had warned the move was possible in May, and late profit-taking brought Japan to a loss. Tepco (9501.JP) dropped 8% and was the exchange’s most active stock on turnover as investors that bought it in March expecting it to reach its lower limit have started to sell to cover their margin trades. Oil stocks rose on higher prices. On hopes they will soon be able to restart projects in Libya, construction stocks continued to march higher in South Korea, though the market fell. China Life (2628.HK) plunged 12% on results, causing insurers to drag Hong Kong down. Ping An Insurance (2318.HK) fell 4% on a block sale of 4% of its shares at yesterday’s close. BYD (1211.HK) dropped another 8%, extending yesterday’s loss on results. Japan July corporate service price index (0.5%) y/y, unchanged m/m. The yen is trading at 76.55 to the US dollar.
European Markets
European equity markets fluctuated on either side of unchanged, paring modest opening gains to trade mixed before again moving higher to currently trade near session highs. The cautious open followed a strong close on Wall Street, mixed markets in Asia following Moody’s downgraded Japan’s sovereign debt and mixed corporate results with Heineken (HEIA.NA) down (12.5%) particularly disappointing. Germany Aug IFO data also briefly pressured equities and the euro. The French government is due to finalise its 2012 budget proposals today, an announcement expected around 18:00 CET (17:00BST, 12:00ET), whilst the main focus of investors remains on Fed Chairman Bernanke's address at Jackson Hole on Friday. Germany Aug IFO business climate 108.7 vs consensus 111.0, prior 112.9, current conditions 118.1 vs consensus 120.0, prior 121.4, expectations 100.1 vs consensus 103.0, prior 105.0. The pound and the euro are trading at $1.6523 and $1.4460 respectively
Today's Economic Releases (Eastern Time)
04:00 Germany IFO Business climate (Aug) 108.7 vs consensus 111.0 and prior 112.9 04:00 Germany IFO Current Assessment (Aug) 118.1 vs consensus 120.0 and prior 121.4
04:00 Germany IFO Expectations (Aug) 100.1 vs consensus 103.0 and prior 105.0
05:00 Eurozone Industrial New Orders (Jun); +11.1% y/y vs consensus +12.1%, prior revised +13.8% from +15.5%
07:00 US MBA Mortgage Purchase Applications (19-Aug); (5.7%) in 19-Aug week; total market index (2.4%); compares to (9.1%) and +4.1%, respectively, in the prior week; refi index (1.7%) vs. +8.0%
30-year contract ARM rate +7bp to 4.39%
08:30 US Durable Orders (Jul); consensus +2.2%
08:30 US Durable Orders ex transport (Jul); consensus (0.4%)
10:00 US FHFA House Price Index (Jun); consensus +0.2%
10:30 US DOE Crude Inventories (19-Aug); consensus n/a
Today's Key Events (Eastern Time)
09:00 Micron Technology Analyst Conference
09:00 Roadrunner Transportation Services to acquire Prime Logistics: /Intl pc 67157589
12:00 Craig-Hallum Call with the CTO of Move, Inc.
13:00 Treasury Auction of 5-yr notes
—:— American Society of Retina Specialists ~ ASRS
—:— Avondale Partners Trucking Forum
—:— Citigroup One-on-One MLP Conference
—:— Craig-Hallum Call with Sykes Enterprises President and CEO
—:— Global Hunter Securities 1x1 Sales Teach-in with Management with Ceradyne
—:— Global Hunter Securities with Lihua International
—:— Global Hunter Securities with Panhandle Oil & Gas
—:— Global Hunter Securities with Scorpio Gold
—:— GT Advanced Technologies (GTAT) will replace Radiant Systems (RADS) in the S&P 600 - after the close
—:— Marcellus NGL & Shale Gas Infrastructure Summit
—:— Morgan Stanley Semiconductor & Semi-Cap Equipment Corporate Access Day
—:— RedChip Small-Cap Equities Virtual Conference
13:00 Energen Investment Community Meeting
Company Specific News
Earnings
BLT.LN (BHP Billiton reports FY EPS $3.94 ex-items vs Reuters $4.11 and year-ago $2.24. Reports FY: Revenues $71.74B vs Reuters $71.24b and year-ago $52.80B)
DY (Dycom reports Q4 EPS $0.38 vs Reuters $0.24)
LZB (La-Z-Boy (LZB) reports Q1 EPS ex-items $0.04 vs Reuters $0.06)
HAIN (Hain Celestial (HAIN) reports Q4 adjusted EPS $0.35 vs Reuters $0.33)
PSUN (Pacific Sunwear (PSUN) reports Q2 EPS ($0.29))
TOL (Toll Brothers reports Q3 EPS $0.25 including tax benefit; revenues $394.3M vs Reuters $403.6M)
Newspaper Articles / Headlines
Australian
- Labor government inclined to oppose any private-equity bid for Qantas. No mention is made of what the government's position would be if a strategic buyer made an offer. Qantas CEO Alan Joyce tells the Australian that the airline has not received any takeover approaches.
- Labor government inclined to oppose any private-equity bid for Qantas. No mention is made of what the government's position would be if a strategic buyer made an offer. Qantas CEO Alan Joyce tells the Australian that the airline has not received any takeover approaches.
Detroit News
- Detroit News summarizes negotiations between Big Three, UAW. The article doesn't really break any news, saying: The talks have been "tough, but drama-free" UAW president Bob King says both the union and the companies want to avoid strikes and bad blood. Some in the union are unhappy with its conciliatory approach, as they feel the UAW should be fighting for the reinstatement of some of what workers gave up in 2007.
Digitimes
- Samsung Electronics (005930.KS) may be preparing to buy Hewlett-Packard's PC business. Sources from the upstream supply chain tell DigiTimes that Samsung has spoken with notebook makers in Taiwan about possibly outsourcing notebook orders, and the idea could indicate that Samsung will purchase H-P's PC business.
Economic Times
- Takeda Pharmaceutical in talks about buying Cipla (CIPLA.IN) or Lupin (LPI.IN). People with knowledge of the development tell the Economic Times that talks with Lupin are now beyond the initial stage. Takeda wants the company's domestic formuations business and research facility, but the promoters are looking for 17 times Lupin's revenue, which was $1.5B in FY11.
A Cipla spokesperson denies the company is in any talks.
Financial Times
- UK homebuilding statistics this week to indicate fall in planning applications granted for new homes. Whitehall sources tell the FT that the Q2 figures will show another drop after the (15%) y/y fall in Q1.
- Luminar Group Holdings dismisses PwC, hires KPMG as auditor. The announcement came midday yesterday (23-Aug in Europe). The FT notes that the company is expected to fail its debt-covenant tests 31-Aug.
- McGraw-Hill moves toward spinning off its education unit. People familiar with the matter tell the FT: The board has not yet finalized its plans for the idea, which could still change. Thinking the costs would ultimately exceed the benefits, McGraw-Hill does not plan to follow the suggestion made by Jana Partners and Ontario Teachers that the company break itself into four.
- Gulfsands Petroleum gives 2.5% of profits from Syrian operations to relative of Syrian President Bashar al-Assad. The FT does not cite sources, though it says that Gulfsands confirms the arrangement. It is known that the Al Mashreq Investment Fund, which is majority controlled by Rami Makhlouf, al-Assad's cousin, owns 5.7% of Gulfsands.
- Spain to amend constitution to limit budget deficit. The FT reports that the law was proposed yesterday (23-Aug in Europe) by Prime Minister José Luis Rodríguez Zapatero, and the opposition supports it.
- Kirin's (2503.JP) 15% stake in Fraser and Neave (FNN.SP) makes Heineken uneasy. Without explaining the context of his comments, the FT reports that Heineken CEO Jean-François van Boxmeer says since Kirin is a competitor, it is not an ideal stakeholder at Heineken's Asian JV partner. Nonetheless, he says that protections have been implemented to avoid conflicts of interest, and there is always the possibility of cooperating globally as opposed to on a case-by-case basis.
Globe and Mail
- Digital aerial signals make it easier for customers to cut pay-TV allegiances. The article is largely anecdotal. It notes that so few Canadians (less than 10%) get their signals through the air that the option is unlikely to shut Rogers Communications (RCI.B.CN), BCE (BCE.CN), or Shaw Communications (SJR.B.CN) down anytime soon. Nonetheless, the threat of customers' leaving is real, and it's part of the reason that Rogers is building a video-streaming service.
Independent
- Momentum grows in campaign for Italy to repeal €3B tax break extended to Catholic Church. The Independent reports that the exemption was granted in 2005 by a previous government led by current Prime Minister Silvio Berlusconi. The article does not give a sense of how likely a repeal is, but it notes that the European Commission has been investigating the tax break since October on suspicion that it might constitute illegal state aid.
Los Angeles Times
- Amazon.com spending to get California sales-tax law repealed. The LA Times reports that Amazon has told California's secretary of state's office that it has given $2.25M to a campaign that seeks to put a referendum on the issue on the state's June primary ballot. The article says that the money is probably going to professional signature gatherers, who have gotten enough people to sign long before the 27-Sep deadline.
New York Post
- In SEC filing yesterday, Dish Network chairman Charlie Ergen asked for permission to transfer satellite licenses. The NY Post reports that the transfer would allow him to use the wireless spectrum and satellite operators he has acquired through various means to create a next-gen Long-Term Evolution internet service. He hopes to make it commercially available by 2014. Dish also hinted that it would create a video streaming service if it can establish the network.
NQN
- Japan to establish $100B, one-year facility to address strong yen. Finance Minister Yoshihiko Noda tells reporters the country plans to: use dollar-denominated funds get Japanese companies to convert yen funds into foreign currencies promote M&As that target overseas businesses.
Telegraph
- Charter's mystery bidder remains a mystery. People familiar with the situation tell the Telegraph that Lincoln Electric's (LECO) advisers have only held exploratory conversations about a counteroffer to Melrose's (MRO.LN), which backs up what Reuters reported earlier (see linked comment).
Without citing sources, the Telegraph reports that Illinois Tool Works (ITW) was mentioned as the bidder -- but banking sources close to the situation said that was unlikely -- and TPG Capital may want parts of Charter.
Wall Street Journal
- WSJ suspects SABMiller (SAB.LN) will end up buying Foster's Group Limited by raising offer slightly. A "Heard on the Street" column says:
A share buyback for SABMiller might send the wrong signals, and Foster's has qualities that make it an attractive target for the company
But there's no other bidder, and SABMiller is already offering a higher multiple than it usually does, so a large bump in price simply isn't likely
- WSJ is cautious on Sprint Nextel. A "Heard on the Street" column warns that selling the iPhone takes at least a year to raise a carrier's bottom line, due to the subsidy costs involved. And the more new customers Sprint gets, the hit to its profitability will be greater and take longer to reverse.
- WSJ is negative on new Japanese financial creation: "double-decker" funds. A "Heard on the Street" column says the high-dividend-yield/high-
- Groupon's China JV closes more than ten offices, fires about 400 employees. Current and former employees report the moves to the WSJ, which notes that only eight months ago, the company was expanding wholeheartedly in the country. A Groupon spokeswoman says the company is fine-tuning its strategy, not abandoning the market. The article reminds readers that other western internet companies like Yahoo (YHOO), Ebay (EBAY), and Google (GOOG) have found China difficult to negotiate.
- WSJ looks at likely strategy for Douglas Peterson, rising president of Standard & Poor's. Apart from painting Peterson's history, the WSJ expands only slightly on yesterday's article in the FT. The WSJ notes that Peterson gained experience saying "Sorry" to government officials in 2004 in Japan with Citi (C). People close to Peterson tell the WSJ he will probably embark on much the same strategy immediately in an effort to quell the firestorm of controversy and scrutiny it currently finds itself in.
- Sprint Nextel to get iPhone 5. The article notes that iPhone 5 will hit the market in Oct, later than most expectations in Sep. StreetAccount also notes there had been earlier reports that indicated Sprint could get the iPhone. 9to5Mac reported on 13-Jun that AAPL was in advanced testing stages for a Sprint compatible iPhone and tech blogs were discussing in May the possibility that the iPhone would be coming to Sprint
Moody's downgrades Japan. Moody's has cut Japan's credit rating to Aa3 from Aa2, citing "large budget deficits and the build-up in Japanese government debt since the 2009 global recession." Moody's also blamed political instability, which will see the ruling party soon choose the country's sixth prime minister in five years. However, the EU's debt crisis is unlikely to spread to Japan, Moody's said, and the nation's outlook is now stable as the government is able to obtain "the lowest nominal rates globally."
German business confidence, eurozone factory orders fall. German business confidence in August posted its biggest fall since late 2008, with the Ifo index tumbling more than expected to 108.7 from 112.9 in July. The slowdown in the U.S. and debt problems on both sides of the Atlantic were the main reasons for the worsening outlook. As if to underscore the despondence of German companies, data showed that eurozone industrial orders dropped 0.7% in June after rising 3.7% in May, the sharpest fall in almost a year.
Merkel opposes collateral for bailouts. Angela Merkel has rejected demands that Greece provide collateral for its bailout amid requests from several countries for a Finnish-type deal in which Greece puts ups hundreds of millions of euros in cash as a guarantee. The fissure could expose the eurozone to new dangers, as Finland has threatened to drop out of the bailout if its collateral demands aren't met. In response, Greek two-year bond yields rose two full points to 42%, their highest levels since the launch of the euro.
Fitch: Global CDS liquidity hits fresh record. Worries over government deficits have pushed global CDS liquidity to the highest level on record, Fitch said. Developed-market sovereigns - not emerging markets - have led the surge, indicating renewed "uncertainty on the potential for eurozone contagion" and a global slowdown.
Gaddafi stays defiant. Speaking from a secret location and remaining as defiant as ever despite the fall of his compound yesterday, Muammar Gaddafi has called on Libyans to "cleanse Tripoli of rats" in a message broadcast by the Al-Ouraba local TV station. While pro-Gaddafi loyalists continue to fight on the outskirts of the capital, the rebel council plans to move to Tripoli as early as tomorrow. Brent crude futures are -0.3% at $108.98 and WTI is -0.25% at $85.23.
FDIC must face $10B lawsuit over WaMu. A federal judge has turned down the FDIC's attempt to dismiss a $10B lawsuit filed by a unit of Deutsche Bank (DB) over bad mortgages that were securitized by Washington Mutual before it was seized by regulators and sold to JPMorgan (JPM). The unit argues that loans that WaMu pooled into mortgage bonds did not meet the underwriting standards that had been promised, causing investors to lose billions of dollars. The FDIC had argued Deutsche Bank should sue JPMorgan and not the agency.
ComScore sued for software installations. Two Internet users are suing comScore (SCOR) for secretly installing illegal data-mining software on their computers. The litigants say the program collects user names and passwords, credit card numbers, and prices paid for consumer goods. This is in addition to logging the sites consumers visited and ads they’ve clicked on. If it succeeds, the lawsuit could undermine confidence in comScore, which sells data from about 2M people across 170 countries to financial analysts, advertising agencies and other businesses.
NY AG dropped from foreclosure panel. New York AG Eric Schneiderman has been removed from a committee of state AGs negotiating a deal with major banks over inappropriate foreclosure practices. Schneiderman, who was accused of undermining the work of the panel, opposes any agreement that releases banks from other litigation, including over the securitization of mortgages. Given the importance of New York, a nation-wide deal it doesn't agree to could still leave uncertainty about the banks' liabilities. The institutions involved are Bank of America (BAC), JPMorgan (JPM), Wells Fargo (WFC), Citigroup (C) and Ally Financial.
BofA turmoil continues. Fears about legal liabilities and writeoffs again played havoc with Bank of America (BAC) yesterday as five-year CDS spreads hit levels higher than during the peak of the financial crisis. Shares also tumbled as much as 6.4% yesterday before a broad market rally helped BofA recover to close at -1.9%. The bank had to defend itself from a blog post by former securities analyst Henry Blodget, who said it faced $100B-$200B of writeoffs and troubled assets. BofA called Blodget's claims "exaggerated and unwarranted."
BHP net profit soars 62%. BHP Billiton's (BHP) FH2 net profit excluding items jumped 62% to a record $10.98B, boosted mostly by soaring prices for iron ore. However, the figure missed forecasts, and the world's largest miner warned about higher expenses and was cautious about commodity prices in the short term due to expected weak growth in Europe and the U.S. BHP raised its dividend by 22% but won't buy back shares, as speculated, because its $12.1B acquisition of Petrohawk Energy (HK) will absorb any extra cash. Shares -1.2% premarket.
Insurers on edge as Hurricane Irene heads for east coast. Insurers and reinsurers are preparing for major losses as Hurricane Irene, now at Category 2, heads towards the east coast of the U.S. after hitting the Caribbean. Macquarie's Amit Kumar thinks any losses north of $20B would "mark the tipping point" for the property catastrophe reinsurance market, producing a major overhaul of how the industry operates. Irene could arrive in the U.S. at the weekend, not long after yesterday's 5.9 earthquake in Virginia that caused a nuclear plant to close.
HP sues AU Optronics. AU Optronics (AUO) is being sued by HP (HPQ), one of its largest clients, for allegedly conspiring to fix prices of thin-film transistor LCD panels. HP is relating its complaint to a pending group case against LCD makers on behalf of the buyers of the screens used in PCs, TVs, and mobile devices. HP's lawsuit follows the Justice Department indicting AUO for price fixing last year.
Research
Benchmark: upgraded TSO
Citi: upgraded OMAB
Credit Suisse: upgraded SKS, PWRD
Janney Capital: upgraded HURN
Jefferies; upgraded CACI
Morgan Keegan: upgraded ATRC; downgraded ABT, BSX
Morgan Stanley: upgraded NUE; downgraded STLD, X
Oppeneheimer: downgraded PSUN
UBS: upgraded NDAQ
Options
The VIX dropped 6.17 or 14.54% on the session yeserday; the 3rd largest one-day drop this year. A few notable things about this drop: 1) The contrast between this drop and the one last week (8/11) when a 4.63% increase in the SPX was met with a drop of 9.28% in the VIX. The market sees near-term certainty being restored at a faster pace than before. 2) The volatility of the VIX (or “vol-of-vol”) is nearing an all-time high (30-day realized vol=236.5). The daily re-pricing of risk has been extreme. 3) Longer-dated vols (Sep and beyond) are meaningfully higher than they were on 8/8- the day spot VIX peaked at 48. Short term uncertainty appears to be falling and long term uncertainty is rising: A classic symptoms of a bipolar market.
Banks - we are still concerned even after yesterday's move in the market 1) BAC’s 1.87% decline 2) a 21% increase in XLF front month implied vol and 3) European senior bank CDS reaching all time highs (BNP, Soc Gen, Deutsche Bank, UBS) 4) US Senior financial CDS reaching wides since the financial crisis (JPM, C, BAC, MS, GS). Make no mistake; the backdrop for banks is ugly. XLF Skew says it all. Look at the Oct 10 strike puts, at $.38 those puts they are trading nearly 40 vols (118%) over the nearly equivalent out of the money 15 strike calls which closed at $.06. In simple terms the market is implying that the probability of a 19% decline in the XLF by October expiration is nearly 6x greater than that of a 21% increase.
The skew in XLF looks too rich to pass up. We like making a “bearish within a range” bet on XLF while leveraging its steep skew to one’s advantage via a purchase of the Sep 12-10 1x2 put spread (buying 1 Sep 12 put & selling 2 Sep 10 puts) for $.29. With a max profit of $1.71 or 5.9x the upfront premium paid we think the risk reward on this trade is too good to pass up.
http://seaofopportunity.blogspot.com/
*Special thanks to Option Radar, BMO Capital, MEB Options, Bloomberg, Reuters, Optionistics, LiveVolPro, CBOE, AMEX, Option Monster, T.O.P. group, 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.
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