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Monday, May 9th, 2011
12:20pm (EST)
The market has gotten off to a slow start as both the bulls and bears feel each other out before mapping their next move. Futures were pointing towards a higher open but were weakening as we headed towards the opening bell. There is some rhetoric out of Europe concerning Greece as S&P downgraded their debt (again) amid concerns the country will need more bailout funds which has kept traders in check.
The Dow had traded in a tight range, hitting a high of 12,669 at the open while the low has been 12,620. However, things are picking up as we head to press as the index is currently up 61 points to 12,700. The S&P is up 7 points to 1,346. The Nasdaq is showing a gain of 18 points to 2,845.
Citigroup (C, $44.02, down $1.18) completed it 1-for-10 reverse stock split this morning which is why you shares in the $40’s and not at $4+. We aren’t big fans of reverse splits which are usually done by companies that are about to lose their listing on an exchange or to get investors’ confidence up. When a company does a reverse stock split they are trying to maintain compliance but Citigroup is a little different because they really didn’t have to do the split.
Citigroup’s new share price will make it easier to short and for mutual fund managers to buy. Most funds restrict managers from buying stocks under $5 so this won’t be a problem at today’s prices. Speaking of reverse stock splits…
American International Group (AIG, $29.57, down $1.13) is at new 52-week lows today. Imagine that. We covered the company’s reverse stock split a few years ago which helped them keep their listing on the NYSE. AIG’s shareholders approved a one-for-20 reverse stock split in 2009 and we did well shorting this name all the way down to $1 before the split. In fact, some of our BEST option trades have been shorting AIG if you look at our Track Record over the years.
We have a lot to cover inside our Members Area including a trade adjustment. On two of the three trades we able to get filled at our recommended prices but we are going to have to raise our entry price for our other recommendation. Subscribers, check for the updates.
Tags: AIG, c, call options, high beta stocks, Hot stocks, momentum options, Momentum stocks, option tips, options trading course, reverse stock splits, stock market options, strangle option trades, weekly options
Posted in Market Analysis, Trade Update, Trading Tips | Comments Off
Wednesday, April 28th, 2010
9:05am (EST)
The market acted “shitty” yesterday if you were a bull.
Excuse our French this morning but if Senator Carl Levin can use that word over and over again on basic cable then we can use it to describe the bulls frustrations yesterday.
The market got absolutely crushed following the debt downgrades for Greece and Portugal and, perhaps, the negative picture Washington is trying to paint of Goldman Sachs (GS, $153.04, up $1.01).
The bulls started off in the hole but were making a push to greener pastures before news hit a little after 11am (EST) that Standard & Poor had slashed its rating on Greek’s government debt to junk status.
The downgrades didn’t stop there though.
Portugal’s debt was also lowered by a couple of notches, with Standard & Poor maintaining a negative outlook on both countries.
As a result, the Dow suffered its fourth largest drop of the year, 213 points or 1.9%, and fell below the 11,000 level at 10,991. The S&P 500 plunged 2.3%, or 28 points, and closed below the 1,200 level in the process. Meanwhile, the Nasdaq plummeted 52 points, or 2%, to settle at 2,471 and drifted below the 2,500 level.
While most Financial stocks plunged on Tuesday, Goldman actually traded higher after starting the session in negative territory. The firm’s “star” trader, Fabrice Tourre, “categorically” denied any involvement in securities fraud before the panel and looks forward to defending himself in court.
We aren’t sure if there was a clear winner or loser in the grilling Goldman got but like the company’s CEO said, they will not survive without their clients trust. Shares of Goldman ended higher on the day when other “shaky” stocks tanked.
American International Group (AIG, $37.37, down $7.14) tanked 16% as over 33 million shares traded hands.
Despite yesterday’s sell-off, futures are pointing towards a slightly higher open this morning. Dow futures are up 33 points to 10,988 while the S&P 500 futures are higher by 4 to 1,185. The Nasdaq 100 futures are 10 to 2,019.
We have a lot to cover in our Members Area this morning so let’s get to it.
Tags: AIG, GS, option picks, option signals, options alerts, stock options trading
Posted in Company Commentary, Financial Stocks, Market Analysis | Comments Off
Monday, March 8th, 2010
9:00am (EST)
Futures are trading in a narrow range this morning as we get ready for the upcoming week. There is little economic data due out during the first half of this week and earnings are coming to a crawl so Wall Street will be looking for other cues to give the market direction.
Asian markets surged last night in their first trading session following the upbeat U.S. jobs report but the European markets fell slightly.
The good news, if you are bullish, is that there are a lot of upgrades on stocks this morning that could get the bulls in a buying mood.
Research In Motion (RIMM, $69.50, down $0.48), Yahoo (YHOO, $16.06, up $0.25) and U.S Steel (X, $58.90, up $2.26) all got upgrades and are showing higher bids in pre-market trading.
M&A (mergers and acquisitions) activity continues to pick up… American International Group (AIG, $28.08, up $1.37) is selling one of its major foreign subsidiaries (Alico) to MetLife (MET, $38.92, up $0.81) for $15.5 billion. It is the second major sale for AIG this month as the company tries to get leaner and meaner.
The Entertainment stocks could get a pop after seeing “Alice in Wonderland ” bring in a whopping $116 million in its opening weekend – a record for a 3-D film. We knew Alice would be a hit and the total easily surpassed all other films in release and gave Walt Disney (DIS, $33.22, up $0.65) an even bigger opening than “Avatar.” Imax (IMAX, $13.72, up $0.40) also benefitted as their theaters were packed all weekend long.
Earnings:
Monday: Casey’s General Stores (CASY, $31.86, up $0.21), Kronos Worldwide (KRO, $15.69, down $0.27), ResCare (RSCR, $9.53, up $0.34), TiVo (TIVO, $17.50, up $0.97) and Value Line (VALU, $25.42, up $0.45).
Tuesday: Boston Beer Company (SAM, $50.54, up $0.74), Dick’s Sporting Goods (DKS, $25.19, up $0.83), J. Crew Group (JCG, $45.61, up $1.55), Kroger (KR, $22.74, up $0.05), Overstock.com (OSTK, $13.43, up $0.35) and Tootsie Roll (TR, $28.17, up $0.87).
Wednesday: American Eagle Outfitters (AEO, $16.74, up $0.01), Bon-Ton Stores (BONT, $11.78, up $0.68), Elbit Systems (ESLT, $60.58, up $0.09), Gymboree (GYMB, $45.15, up $0.40), Hot Topic (HOTT, $6.71, up $0.08), Men’s Wearhouse (MW, $25.17, up $0.74) and Vail Resorts VPFG, $15.48, up $0.18).
Thursday: Aeropostale (ARO, $25.56, up $0.56), Goldcorp (GG, $40.37, up $0.80), National Semiconductor (NSM, $14.67, up $0.04), Pall Corp (PLL, $41.32, up $0.68), Piedmont Natural Gas (PNY, $26.74, up $0.35) and Smithfield Foods (SFD, $19.09, down $0.36),
Friday: AnnTaylor Stores (ANN, $18.50, up $0.53), Citi Trends (CTRN, $29.50, up $0.13) and Kirkland’s (KIRK, $18.81, up $0.81),
As we head to press, Dow futures are up 7 points, S&P 500 futures are up a point while the Nasdaq 100 futures are up 2. Current subscribers, check the Members Area for the updates.
Tags: AIG, DIS, met, option picks, option signals, options alerts, RIMM, stock options trading, x, YHOO
Posted in Company Commentary, Earnings, Market Analysis, Market Commentary | Comments Off
Monday, March 1st, 2010
9:05am (EST)
Futures are pointing towards a higher open this morning following reports of a new bailout package for Greece. The foreign markets rallied overnight on growing hope that the European nations will announce a bailout deal to help Greece with its mounting debt problems.
The market is also getting a lift after American International Group (AIG, $28.23, up $3.46) agreed to sell its Asian life insurance business to Britain’s Prudential PLC for $35.5 billion. It’s the biggest deal yet made by AIG since it received multiple bailout packages from the government during the credit crisis but the company is still bleeding. AIG reported disappointing fourth-quarter results Friday and continues to lose massive amounts of cash.
In other earnings news, Dish Network (DISH, $20.07, up $0.10) reported a profit of $179 million, or $0.40 a share, versus $217 million, or $0.48 a share, in the year earlier period. Wall Street had been expecting $0.32 a share.
 Dish Network As we head to press, Dow futures are up 27 points to 10,338 while the S&P 500 futures are higher by 1,106. The Nasdaq 100 futures are showing a 6 point pop and are at 1,824. We profile a NEW TRADE this morning in the Members Area so let’s get to it…
Tags: AIG, DISH, Dish Network, option picks, option signals, options alerts, stock options trading
Posted in Company Commentary, Earnings, Market Analysis, Market Commentary | Comments Off
Wednesday, September 9th, 2009
9:00am (EST)
American International Group (AIG, $35.45, down $4.20) fell 10% yesterday after a Credit Suisse analyst downgraded the stock from “Neutral” to “Underperform”. Their research pointed to the fact that “near term monetization of value of businesses suggests little to no value for common equity.”
For those of you who have followed me for a while know I profiled a monster put option trade in AIG last year that returned over 850%. The stock was at $20 on August 26th, 2008 and by September 15th, the stock was at $4. The next day AIG hit a low of $1.25.
Because I have followed the stock for years, I know how to take advantage of the market’s love affair for the shares. I have been saying since that 2008 Blog that AIG was a dog.
To make a long story short, AIG was under a buck when it did the 1-for-20 stock split back in July. I profiled two put options on July 8th that returned 71% and 132%, respectively, as AIG fell back below $10.
I saw another opportunity for a strangle option trade last month:
On August 20th here were my thoughts with that day’s option price:
“American International Group (AIG, $33.49, up $6.85) is up 25% today and it’s hard to believe the stock has rebounded from a low of $13 since the beginning of August. Incredible. The September 35 calls (IKJII, $4.10, up $3.05) have soared nearly 300% after opening at $1.22. There is a combination of a lot of things going on with AIG right now and although I don’t trust this dog to go long, there may be a chance for a STRANGLE option trade. The September 25 puts (AIGUY, $1.65, down $1.05) have dropped 40%.
The stock is up on some CEO fluff who believes he can “maintain shareholder value”. Good grief. Give me break. He failed to mention that his company did a 20-to1 reverse stock split and right now the shorts are getting hammered. I’m going to do some more research on this one but a strangle trade is when you play both sides of the ball hoping for a big move.” (END)
A week later on August 27th, I gave two updates on AIG and had this to say about the AIG call options. This was before the market opened that day:
“If AIG continues to shoot to the moon then the calls will continue to go higher and they could triple again if AIG goes to $50. They would be worth $15.” (END)
This was the afternoon blog:
“AIG has hit $50 today and is currently up 30%. The call options I’m talking about are the September 35 calls (IKGII, $15.00, up $9.55) which closed yesterday at $5.45. As Biggie Smalls would say..”It Was All a Dream”…but this dream has come true. Bam, The September 35’s are right at $15, up 175%. Folks, they opened at $7.50 and have doubled.” (END)
One day later on the 28th:
“As far as specific stocks, make sure you close the AIG (AIG, $49.81, up $1.97) call options today. The stock hit a high of $55.90 this morning which represented the perfect opportunity to sell the September 35 calls (IKGII, $15.80, up $1.70) which printed $21.00 today. ” (END)
The total return for the call side of the strangle trade would have been 400% from $4 to $20. The point is you would have made more than enough to cover the put side of the option trade even if it expires worthless!
Now, the September 25 puts (AIGUY, $0.55, up $0.20) were picked up for $1.65 so they are still DOWN 67% but they gained over 55% yesterday. With yesterday’s downgrade, these put options have a chance of making it back to the entry price and who knows? You may even be able to squeeze out a profit on this side of the trade as well.
The total cost of the trade would have been $5.75 ($4.10 for the calls and $1.65 for the puts. If you sold the calls at $20 and sell the puts for 50 cents or $1.00 then you are still looking at a return of over 400%!
I know that was long winded and it probably made for some good bathroom reading material but I wanted to review this trade to show some of our new subscribers how strangle trades really work.
My question is, where was Credit Suisse when the stock was at $55?
Once you follow a stock and learn how it trades, how it reacts to news and if it’s overvalued or undervalued; you will then learn how to find some really nice trades. There are other high-flying stocks that make great strangle candidates but you still have to do the homework and find the right options.
Tags: AIG, American International Group
Posted in Company Commentary, Option Trades | Comments Off
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Futures Pointing Towards Slightly Higher Open
Wednesday, April 28th, 2010
9:05am (EST)
The market acted “shitty” yesterday if you were a bull.
Excuse our French this morning but if Senator Carl Levin can use that word over and over again on basic cable then we can use it to describe the bulls frustrations yesterday.
The market got absolutely crushed following the debt downgrades for Greece and Portugal and, perhaps, the negative picture Washington is trying to paint of Goldman Sachs (GS, $153.04, up $1.01).
The bulls started off in the hole but were making a push to greener pastures before news hit a little after 11am (EST) that Standard & Poor had slashed its rating on Greek’s government debt to junk status.
The downgrades didn’t stop there though.
Portugal’s debt was also lowered by a couple of notches, with Standard & Poor maintaining a negative outlook on both countries.
As a result, the Dow suffered its fourth largest drop of the year, 213 points or 1.9%, and fell below the 11,000 level at 10,991. The S&P 500 plunged 2.3%, or 28 points, and closed below the 1,200 level in the process. Meanwhile, the Nasdaq plummeted 52 points, or 2%, to settle at 2,471 and drifted below the 2,500 level.
While most Financial stocks plunged on Tuesday, Goldman actually traded higher after starting the session in negative territory. The firm’s “star” trader, Fabrice Tourre, “categorically” denied any involvement in securities fraud before the panel and looks forward to defending himself in court.
We aren’t sure if there was a clear winner or loser in the grilling Goldman got but like the company’s CEO said, they will not survive without their clients trust. Shares of Goldman ended higher on the day when other “shaky” stocks tanked.
American International Group (AIG, $37.37, down $7.14) tanked 16% as over 33 million shares traded hands.
Despite yesterday’s sell-off, futures are pointing towards a slightly higher open this morning. Dow futures are up 33 points to 10,988 while the S&P 500 futures are higher by 4 to 1,185. The Nasdaq 100 futures are 10 to 2,019.
We have a lot to cover in our Members Area this morning so let’s get to it.
Tags: AIG, GS, option picks, option signals, options alerts, stock options trading
Posted in Company Commentary, Financial Stocks, Market Analysis | Comments Off