Sunday, March 18, 2012

Options Commentary, Tips and Advice from Big Money Options

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Any thoughts on SPDR Gold Shares (GLD) puts for us?

I was able to get into the Masco (MAS) trade at a discount to your entry. Should I still hold it? Do you still like it?

At your advice, I own 5 April 10 FNFG at 40. I am considering buying 10 more at 10 to get my average down to 20. Thoughts?

This past week, the bullish trend was tested on Tuesday as Greece's disorderly default, European economic recession, slowing growth in China (official government growth target revised down to 7.5% from 8%), high gas prices and other fears collectively spiked and caused the worst one day pullback year-to-date.

I'm a small options trader who is learning & trying to benefit from options. I allocate roughly $500 per option trade and keep the number of option trades at 10 or less. How many trades at most do you keep open?

At the start of the year, we believed an up market was a no brainer, as there was overwhelming bullish forces at work. Today, with the market reaching a weekly closing high, but with signs of fatigue, we have to pick sides.

What are your thoughts on the DISH position, after the news on Friday? Should we be selling? Putting hard stops in?

Are put plays on the horizon? Many serious earnings misses really offered BIG opportunities.

When you mention an option in a daily comment, are you telling us to consider purchasing those options?

Why do you continue to like our trades in Endologix (ELGX) and Teradyne (TER) even though they're down?

There seems to be persistent call buying in MIPS Mar 7 calls over the last couple of weeks, and big activity today. Your thoughts?

After 12 years of a sideways, choppy market that is lower today than where it was in 2000, the words 'bull-market' sound foreign.

The best indicator of the health of the market in the near-term is the current price and its trend. The Dow just reached a 52-week high. The Nasdaq recently touched a 12-year high. The S&P 500 is only a few points away from a 52-week and multi-year high.

I have been looking at TQNT for May or August $7 Call option. Is this worth pursuing?

We just spent the past four days at the World MoneyShow in Orlando. If there were any broad takeaways, it might be that we are moving toward a more normalized investment environment, despite individual investors having little conviction or passion for the equity market.

President Obama's State of the Union address last Tuesday was titled 'An Economy Built to Last.' The title sounded like a Detroit advertising slogan. It rang like 'Built Ford Tough,' which was probably just the message the President wanted to send.

Watch the Feb. 6 webinar here:

What do you make of the large activity in ARBA Mar 35 calls today?

What do you think of activity in MRX Mar 35 calls today?

President Obama's State of the Union address last Tuesday was titled 'An Economy Built to Last.' The title sounded like a Detroit advertising slogan. It rang like 'Built Ford Tough,' which was probably just the message the President wanted to send.

Last week, we talked about de-coupling: the United States from Europe, treasuries from stocks, and the VIX from risk. This week, things look to be getting back to normal, with stocks advancing, yields rising and the VIX falling.

One of the great Wall Street sayings to explain a breakaway from the norm is, 'It's different this time.' In a normal business cycle, innovation can cause temporary excesses. Through the years, there are many examples of innovation that has pulled great pools of capital, from railroads and cars to computers and the Internet.

What do you make of recent activity in the Huntsman Corp. (HUN) Feb 9 Calls?

Watch the Jan. 9 webinar here:

Being long a bunch of calls, we welcome the bullish start to the New Year. Many of our positions did much better – we needed it and still need more of it.

We expect to see a much more healthy investment landscape in 2012. The U.S. economy has shown steady growth for the past 12 months, with recession worries diminishing. The risk of a widespread European bank meltdown has been greatly reduced. U.S. corporations are rich in cash, willing to buy stocks if individuals won't. And the market is trading at a P/E 14% below where it was a year ago on rising earnings. With stocks appearing more attractive now, it seems like a no-brainer that capital flows back into equities and P/Es should expand as the VIX falls.

Where can I find an explain of your usage of the delta number that you mentioned in this morning's Daily Trader's Outlook? For instance, on AXL you indicate the delta is 18. What does that mean?

We started in the business, electronic trading didn't exist and was almost unimaginable because we all believed that each trade required special attention to be completed accurately. Three hundred of us sat shoulder-to-shoulder, dialing for dollars and yelling trades at each other. The noise level sound in the room was practically deafening. When we'd ask our more experienced co-workers how they knew when a market had hit bottom, they all had one answer: 'You can hear a pin drop.'

When you say to sell to open in a 1:1 ratio what do you mean? If I buy 100 shares should I sell to open 100 contracts?

Could you please compare the reasons why you're bullish in today's market as compared with the market this summer? Earlier this year, we all went long due to a bullish market sentiment indicator signal, which did not work in our favor. How is this bullish signal different?

In looking at your recommendations over a long period, it seems there are a lot more losers than winners. Why aren't you recommending puts in this uncertain market?

Any ideas or suggestions on the AMKR short puts that were assigned? I'm still holding this stock.

Last week, we talked about the European Union facing a pass/fail test on the subject of long-term financial viability. By the market close on Friday, they had turned in their complete response and received a grade of 2 out of 3, which was considered a pass on Friday. Somewhat like an NFL football game, the review committee is expressing some doubt today about whether it's really a passing grade.

I'm wondering about the TLAB Jan 5 Calls. My account shows this position as having no value. I'm confused. Has this position closed out?

Watch the Dec. 5 webinar here:

This is the time of year when final exams are administered. The 17-country eurozone is scheduled to take its final on financial viability this Friday. It's a one-question exam graded on a pass/fail basis. The question is, can you create a European Union that's financially cohesive and sustainable for the long term?

What do you make of the activity in the LIZ Dec 10 Calls today?

Ask anyone who reads the news: No one is confident about the future. From amateurs to pros, people do not want to own stocks. We live in a time of great uncertainty. We all went over the cliff in 2008. We all remember that feeling. Unfortunately, we all can feel it again. It is Crisis Time.

I'm new to options trading. From what I have observed, when you place a trade, you have a 50% chance of being right. After you place a trade, if it becomes quite evident that you're on the wrong side of the trade for the short term, is there a strategy to act quickly and buy the other side of the trade? Is it as clear cut as buying the same play on the opposite side?

I'm a new subscriber. Am I seeing the correct track record for your closed trades for this year? Looks like you have several 100% losers. I currently hold four of your call positions. All are significantly underwater. Other services I subscribe to have been recommending lots of put trades.

With two hours to go until the market close Wednesday, investors collectively hit the sell button in reaction to Fitch's warning about the banking industry. Today, the news continues to disappoint, as the Super Committee is expected to say it hasn't reached a budget-cutting agreement. So is the sell-off that started intra-day last week just a scare or a break?

Between now and year's end, the U.S. stock market is going higher. We'll be putting on a lot of trades in the next few weeks to take advantage of the rising market. Last week, we added three new positions.

Any significance in CIE Jan 12.50 Calls trading today?

Big activity again in the NXPI Jan 15 calls. What do you see here today?

Watch the Nov. 7 webinar here:

Simply said, stock prices are indicating that stocks are going higher. There is nothing as bullish as a rising market. The S&P 500 (SPX) has risen 18% off its lows. The average stock has traded up above the 75-day moving average and has held this level for two weeks. History tells us that the average bull move from this period forward is approximately another 20 weeks.

The Cardinals have won the World Series 11 times. When the Cardinals win, the Dow often has posted a winning year as well. This fortunate coincidence would suggest we're less than halfway to our end-of-year high on the Dow.

Is the activity in CHMT Nov 10s and 12.5s today a bull spread being put on?

The purpose of our weekly update is to provide you with a map of the obstacles and opportunities we expect to face in the intermediate term. This Wednesday, Europe will unveil its sovereign debt stabilization plan. This is by far the controlling factor for stocks. The release of the detailed plan will either soothe or scare the markets.

It looks like CHMT is taking a flying leap. I wasn't able to take advantage of your recommendation yesterday. So what's going on with this option? Do you still feel the same about this recommendation? Should I open it?

We're right back at the top of the range. Since early August, the S&P 500 (SPX) has sharply reversed as soon as it touched 1,220. This raises the question, is it different this time?

Why didn't you do an options trade on Liz Claiborne (LIZ) yesterday?

There's big volume today in WFT and KWK. What do you make of it?

What is the difference between selling puts and buying calls? Both are bullish trades. Is selling puts more risky?

Take a look at the action in the DYN calls today -- implied volatility now 148%. What do you make of the activity?

Kickoff is set for tomorrow at 4:30 p.m. ET. That's when Alcoa (AA) reports earnings. Earnings surprises should total around 2.7% to the upside in 3Q and translate into earnings growth just over 16%. We expect that earnings should be able to keep the S&P 500 (SPX) above its recent lows until the European finance ministers put forth their eurozone plan by Nov. 4.

My FST calls have moved to a new option type, and I don't know why.

John Jagerson discussed value investing in the current market environment and reviewed upcoming labor reports that could affect the market's direction. Then, we answered your questions live. Topics discussed included updates on several trades, including AU Optronics (AUO); 'safe-haven' investments such as gold, bonds and the dollar; and selling covered calls when the CBOE Volatility Index (VIX) is high.

During the last 40 trading days, the S&P 500 (SPX) has averaged a daily move of up or down 1.9%, and the difference between the index's closing high and closing low has been just 8%. The market is chopping hard and going nowhere. To predict with any conviction what will happen in the short term is like guessing the toss of a coin. But based on what we see and how history has played out before, we are willing to take a stab in the dark.

For six weeks, the S&P 500 has vacillated between roughly 1,120 and 1,220 as investors' moods swing from disaster to hope to disaster regarding the euro and recession. What was a record of higher lows and highs now is potentially a bearish head-and-shoulders pattern, with Aug. 17 and Sept. 19 being the 'shoulders' and Aug. 31 being the 'head.'

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