General Options Blog

Unusual Option Trade Alert Leads to 17 Consecutive Positive Closes

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unusual

I'm always on the lookout for unusual option trades. At the start of this year I was the first to spot highly unusual PUT action for $LNCO, for example. It also ended up being a $20-plus million profit for the buyer of those PUTs, for what it's worth. Check ou the $LNCO PUT post here: https://www.optionmillionaires.com/2013/lnco-line-enormous-and-unusual-option-bet-highlighted-months-ago-hits-paydirt/

And how about $LEAP wireless calls? $13k was turned into over $1 million! https://www.optionmillionaires.com/2013/leap-suspicious-13k-trade-could-net-over-1-million-when-the-market-opens-on-monday/

While I try to post the most unusual trades on the blog here at optionmillionaires.com, our forum is where you'll find most of the unusual option trades, volume, activity, etc. I don't post every single unusual trade, or volume, but just the ones I think are meaningful. Take $SXC, for example. On September 11th, 2013 I pointed out some unusual call buying in $SXC (Suncoke Energy). The stock has been on a tear ever since and has posted 17 consecutive positive closes. That's like a 30-game hitting streak in MLB or a 15 game winning streak in the NBA.

Additionally, the calls are up over 500% since then. Simply put, the unusual call buying was a great indicator of where the stock was headed going forward. Here's the link to my $SXC post in the forum: https://www.optionmillionaires.com/forum/showthread.php/564-Sxc Helpfully, you can also find my unusual trades, volume, and posts in the forum at optionmillionaires.com as well: https://www.optionmillionaires.com/forum/

sxc

One Trade I Made Today

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With the market just off all-time highs and seemingly rising every day, there will be a pull back again. I know bears, and it's been rough watching this action but you've had some pullbacks this year you could profit on. The most recent pullbacks, in fact, have seen some of the high flyers get kicked to the curb. I also bought PUT options in a high flyer that I think could see a modest pull back as the market consolidates the next week or two.

The chart below goes against what I usually trade. Essentially, I don't trade against the trend. The trend for this stock is clearly up. However, my thought process is such:

Stocks are going to consolidate and/or pull back short term
The stocks that have rallied the most will likely fall the most

$PSMT has been on a tear. They reported earnings and rallied significantly. I'm looking for a move back to $110-112 where I will lock 100-300% profits on my November $115 puts. I will cut my losses at $120 break.

I own 3 contracts at $1.20 and will sell for a loss on $120 break, or hold for 100% gain on the pull back I see coming.

psmt1

November 1st, 2013 Watch List

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It was a second down day, as the markets slipped into the red late afternoon on some profit taking and concerns over an Israeli attack on some Syrian missile shipments. Folks don’t realize those Israeli attacks have happened before, so I don’t think that should be of much concern at the moment. The VIX was up a bit, and is channeling nicely.

FB had a nice rally off the open and ramped most of the day, providing buyers of the calls in the morning some nice profits. Unfortunately those buying calls the day before didn't have the same success. It just goes to show you that sometimes it’s best to wait to trade an earnings play. There's less risk involved and sometimes there's even more reward.

There were earnings reports from FSLR and AIG after hours, with FSLR really beating estimates while AIG disappointed. FSLR is up nearly 9-percent pre-market, and it had a few upgrades this morning.

The US dollar is up again today and is starting to gain strength after breaking over $80. Seems there are so many folks out there betting on the dollar weakening, that this strength is catching them off guard. It also seems like the correlation between the dollar and gold is back, with gold is down another one-percent pre-market. I still hold DUST calls and may look to get some for next week today. ABX (Barrick) also announced an offering yesterday to raise funds to pay off debt. The news has the stock down over 6% and should help DUST gain some more traction today.

NFLX had an upgrade to $420 by Baird this morning and the stock is up nearly three-percent pre-market. It'll be interesting to see if it can breakout today.

Here are some of the analyst changes of note for today:

OPEN OpenTable downgraded to Hold from Buy at Wunderlich
Wunderlich downgraded OpenTable citing valuation and keeps a $72 price target for shares
STRA Strayer Education downgraded at Morgan Stanley
As previously reported, Morgan Stanley downgraded to Underweight from Equal Weight. The firm downgraded shares based on the impact on long-term financial results from the 20% tuition cut. Price target is $30
AVP Avon Products price target lowered to $23 from $27 at Stifel
Stifel reduced its price target on Avon after the company reported weaker than expected Q3 results. The firm thinks the company will likely soon have to consider exploring "more dramatic steps" to improve its performance, including closing its business in underperforming regions. However, the firm still believes the company's fundamentals are poised to improve and it keeps a Buy rating on the stock
MA MasterCard price target raised to $820 from $690 at FBR Capital
FBR Capital raised its price target for MasterCard to $820 and reiterates an Outperform rating on the stock following the company's Q3 results
MGM MGM Resorts shares should be bought after sell-off, says Cantor
After MGM reported lower than expected EPS, Cantor recommends buying the stock, as it expects the company to have a "solid 2014." The firm keeps a $23 price target and Buy rating on the shares
CSCO Cisco results likely to be at low end of guidance, says Oppenheimer
After conducting channel checks and supply chain analysis, Oppenheimer expects Cisco's results for its October quarter to come in at the low end of its guidance. The firm expects the company to be hurt by weakness in emerging markets and the federal government, but it keeps a $27 price target and Outperform rating on the stoc
FSLR First Solar new projects have low overall margins, says RBC Capital
After First Solar reported stronger than expected Q3 results, RBC Capital believes the pull-in of revenue from the company's Desert Sunlight contributed to the beat. The firm, however, thinks the gross margins of the company's new projects are well below its 15%-20% target. RBC Capital raised its price target on First Solar to $40 from $34 but remains on the sidelines on First Solar
NFLX Netflix upgraded to Outperform from Neutral at RW Baird
Baird upgraded Netflix due to increased comfort with risk and strong secular growth opportunities. The firm believes original programming is a sustainable differentiation and that international opportunities are underappreciated. Price target raised to $420 from $383

Here are the strikes I'm looking at for today:

Stock Ticker Call/Put Strike Expiration Closing Price Entry Price
SCTY CALL $56.50 Weekly 0.25 0.30
DUST CALL $36.50 Nov 8th 0.60 0.55

Let's have a great finish to the week, and I hope to see you Sunday night!

- JB

$FSLR Reports Earnings Tonight. Where is it Headed Tomorrow?

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trade-idea

$FSLR is down close to five-percent in early trading that matches the movement of much of the solar sector. $FSLR also reports earnings tonight, which should see the stock post another sharp move when the market opens tomorrow.

The options market sees this move as being for almost $6, and that's an over-10-percent change so trading out-of-the money options will be a big gamble heading into tonight's report. Looking at $FSLR from a chart perspective I think there's a definitive direction that the stock will go post-earnings and it'll be a 20-plus percent move before the stock pauses from its rally.

$FSLR was almost a penny stock not long ago, falling from over $130 per share to less than $12. Since its lows the stock has put in a strong rally and I think the recent consolidation will result in higher prices going forward. Right now, it's has shaped in a nice cup and handle formation. This implies the next move for $FSLR is higher. The next point of resistance will be the recent $59 high, and a break of that price would be terribly bullish for the stock.

I don't think anyone sees $FSLR as a $75-plus stock by early next year, though, but if it does move higher out of this cup and handle I believe a rapid move to $75 could be in the cards. While trading tonight's earnings report via out of-the-money options could be risky, waiting for the premiums to die down early next week and initiating a January call position over $65 could be a very profitable move.

fslr1

October 31st, 2013 Watch List

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HAPPY HALLOWEEN!!

So much for another boring session on Wednesday, as the FOMC statement had the markets bouncing around before selling picked up. It seems that $176 held on the SPY, so we'll see what happens today after the four-day green streak finally came to an end.

The USD found some support as well and it's broken above the $80 resistance area for the first time in a few weeks. I like the USD to find some strength and I also think that bodes well for the markets down the road. Obviously, that's not so good for gold and that precious metal is down nearly 2%. If it breaks $1320 per ounce its slide could pick up speed.

Some big earnings reports came in after the close yesterday, with both EXPE and FB beating estimates. The two stocks were up over 10% at certainpoints but the lovely CFO at Facebook spoke about teen use declining and that was enough to have folks fade the stock. V also reported some in-line earnings and a huge buyback but it wasn't enough to spark shares. Additionally, SAM reported some good numbers and a lowered EPS guidance range. I'm not sure how this stock reacts but I'm hoping for it to be green. We shall see, I suppose.

Here are the analyst changes of note for today:

GM General Motors price target raised to $50 from $45 at RBC Capital
After GM reported higher than expected EPS ex-items but lower than expected revenue, RBC Capital thinks the company's North American division can reach 10%+ margins within the next few years. The firm reiterates an Outperform rating
LULU lululemon shares risky, says Buckingham
After lululemon announced that it had hired a new Chief Product officer, Buckingham is concerned that the company may have lost its edge after the position was vacant for some time, and that the new head merchant's decisions may not resonate with consumers. The firm also believes that the market could be disappointed by the company's new CEO when the hiring is announced, and it recommends that investors reduce their position in the company
WDC Western Digital weakness a buying opportunity, says Brean Capital
Brean Capital said to use the weakness in Western Digital as a buying opportunity. The firm calls it one of its top two picks citing expectations for improvements in gross margins, favorable product mix, and incremental earnings power. Shares are Buy rated with an $85 price target
FB Facebook weakness a buying opportunity, says JPMorgan
JPMorgan believes the post-earnings pullback in Facebook shares creates a compelling buying opportunity and raised its price target for the stock to $62 from $53. The firm says overall teen usage remains stable and keeps an Overweight rating on the stock
SODA SodaStream downgraded to Sell from Hold at Stifel
Stifel downgraded SodaStream to Sell due to revenue shortfalls in the Americas, uninspiring sell-through data, increased S&P spend per incremental unit sold, and return declines in marketing. The firm sees fair value at $40
FB Facebook price target raised to $60 from $54 at Oppenheimer
Oppenheimer increased its price target on Facebook after the company reported stronger than expected Q3 results. The firm thinks that ad volumes could rise in Q4, assuming usage of the site continues to grow. It keeps an Outperform rating on the shares
SBUX Starbucks price target raised to $86 from $80 at Oppenheimer
Oppenheimer increased its price target on Starbucks after the company reported higher than expected EPS, as the firm thinks the company deliberately kept future expectations at reasonable levels, despite the company's new positive catalysts. Oppenheimer keeps an Outperform rating on the stock
EXPE Expedia price target raised to $70 from $65 at Cantor
Cantor increased its price target on Expedia after the company reported stronger than expected Q3 results. The firm keeps a Buy rating on the stock
FSLR First Solar Q3 results a potential negative catalyst, says Deutsche Bank
Deutsche Bank believes First Solar's Q3 results could act as a potential negative catalyst given the recent rally in shares and risk of project push-outs. The firm keeps a Hold rating on the stock with a $42 price target
EXPE Expedia price target raised to $73 from $66 at Benchmark Co.
Benchmark Co. raised its price target for Expedia to $73 following the company's better than expected Q3 results and keeps a Buy rating on the name

I bought some DUST calls to play off the stronger dollar and I may look to add more if gold starts to weaken towards $1320. The last time EXPE reported strong numbers like these PCLN jumped 8-plus percent. I'm not saying that happens today but it may be worth a lotto, as it can really take off if it breaks $1100.

Here are the strikes I'm watching:

Stock Ticker Call/Put Strike Expiration Closing Price Entry Price
PCLN CALL $1,120.00 Weekly 0.50 0.50
DUST CALL $31.00 Weekly 0.25 0.25

Lets have a great day!

- JB