Mylant's Money Blog

Direct TV- Nice Long Term Options Play

DIRECTV (DTV)- Long Term Strangle Options Play

One options investor is positioning for shares in DTV to remain range-bound through expiration in January 2012.

• It looks like the trader initiated a long strangle, selling 5,000 calls at the January 2012 $45 strike for a premium of $1.90 each
• Selling the same number of puts at the lower January 2012 $35 strike at a premium of $2.25 apiece
• Gross premium pocketed on the strangle amounts to $4.15 per contract

The investor keeps the full amount of premium received on the transaction as long as shares in DTV trade within the boundaries of the strike prices described through expiration day in just over one year's times. The strangle-seller may take profits off the table by buying back the position at some future date ahead of expiration.

The long-dated contracts have a great deal of time value priced into the premium received by the investor today. The cost of buying back the strangle will fall as time erodes, and the trader may be able to close out the position profitably before the contracts expire in 2012.

The short stance in both call and put options could result in losses to the investor, however, if DTV's shares rally above the upper breakeven price of $49.15, or if shares slip beneath the lower breakeven point at $30.85 ahead of expiration.

Chinese Raise Interest Rates, Stocks Fall

Stocks set to dip after Chinese rate hike

U.S. stock indexes were poised to fall in early trading Monday after China raised an interest rate over the weekend to combat rising inflation.

It is the second time in three months that China has taken steps to slow the pace of its economic expansion. Inflation jumped to its highest levels in two years in November. Rising prices have led poor families to spend more than half of their incomes on food.

Ahead of the opening bell, the Dow Jones industrial average futures were down 40 points, or 0.3 percent, to 11,478. S&P 500 futures fell 5, or 0.3 percent, to 1,243. Nasdaq 100 futures fell 5, or 0.2 percent, to 2,222.

A blizzard in the Northeast is likely make this a quiet day on Wall Street following the holiday weekend. There are no major economic reports or corporate earnings announcements scheduled for Monday. Trading volume is expected to be light throughout the week ahead of New Year's Day.

Shares were down sharply overseas. The Euro Stoxx 50, which tracks blue chip companies in countries that use the euro, fell 1.5 percent. Asian stock markets closed down less than 1 percent.

Gold- Should Continue Up Some Are Saying

When Gold Correctioin Ends, Uptrend Should Remain Intact

by Prieur de Plessis

The past week witnessed rather volatile trading in gold bullion as the price declined to the 50-day
moving average ($1,369), thereby retracing 62% of its three-week advance from the middle of November to early December. (Read more about Fibonacci retracement numbers here.) It will be very bullish for gold to hold these levels, but failing that it will take a decline below the November reaction low of $1,337 to indicate a larger correction.

 

The point-and-figure chart also indicates $1,330 to be a critical support level. (On a P&F chart price movements are combined into either a rising column of X’s or a falling column of O’s, with each column representing either an uptrend or a downtrend. These charts eliminate the
insignificant price movements that often make bar charts appear “noisy”, removing the often misleading effects of time from the analysis process and making it much easier to recognize support/resistance levels.)

Considering weekly data, it is shown clearly that gold remains in a very consistent uptrend. Although the lower boundary of the rising price channel indicates support only at $1,240, one should not lose sight of the upper boundary occurring at about $1,155. Once gold has completed its nascent correction, the yellow metal could therefore see a fairly sharp advance.

The final words go to Richard Russell, La Jolla-based writer of the 52-year old Dow Theory Letters:

I’m looking at gold as ‘the last man standing’. Since gold is pure intrinsic wealth and it is outside the system, it can’t go bankrupt and it can’t go down to a level of zero value. In [an era] of deleveraging and deflation and slow growth, I’m picking gold as the best safe-haven. If you have a better idea, send me an e-mail …

Cablevision Systems Corp (CVC) Nice Strangle Play

Cablevision Systems Corp (CVC)

A short strangle implemented on the cable operator during afternoon trading indicates one strategist expects shares in Cablevision Systems Corp. to remain range-bound through June 2011 expiration. 

• It appears the strangle-player sold 20,000 calls at the June 2011 $38 strike at a premium of
  $1.25 each
• Sold the same number of puts at the lower June 2011 $29 strike for a premium of $0.85 apiece

Gross premium pocketed by the investor amounts to $2.10 per contract. The trader keeps the full amount of premium received on the transaction as long as shares in CVC trade within the confines of the strike prices described through expiration day next year.

Short stances taken in both call and put options expose the trader to losses in the event that CVC's shares soar 16.0% higher to trade above the upper breakeven point at $40.10, or should shares plunge 22.2% lower to breach the lower breakeven price of $26.90 ahead of June expiration.

Delta Airlines- Nice Bull Call Spread

Delta Air Lines, Inc (DAL)

One long-term bullish player is taking advantage of the pullback in the price of the underlying stock by picking up a Bull Call Spread in the June 2011 contract. It appears that a like-minded optimist purchased the same call spread on Delta Air Lines during trading on Tuesday.

• The trader picked up roughly 3,000 calls at the June 2011 $15 strike for an average premium of $0.91 each
• Sold about the same number of calls at the higher June 2011 $20 strike at an average premium of $0.16 a-pop. Net premium paid to initiate the spread amounts to $0.75 per contract

Thus, the investor is poised to profit should shares in Delta Air Lines jump 24.1% over the current price of $12.69 to surpass the average breakeven point at $15.75 by expiration day in June. Maximum potential profits of $4.25 per contract are available to the trader if Delta's shares surge 57.6% to $20.00 before the options expire next year.

 

Stop Procrastinating.......................Now!

How to Stop Procrastinating

Here are some steps to stop procrastination. The first thing you will want to do is to figure out what is causing you to associate pain to getting a task done. Let's say you want to clean out the garage. Just thinking about it makes you shiver. Well, that's the reason why you have been putting it off. It's what you visualize in your mind that is causing you the pain. You haven't actually done anything yet so in reality, you aren't experiencing any pain.

This means you need to work on what you are focusing on in your mind. In this case, instead of thinking about how long cleaning the garage is going to take, focus on how great it would feel once it's all cleaned up. Or you can focus on all the free time you will have after you get this task over with.

The point here is to get yourself to associate pleasure to getting the task done. When you can get yourself to look forward to taking action, you won't procrastinate.

Another way you can stop procrastinating is to associate more pain to NOT taking action. Let's say you need to get back into shape but you keep putting off going to the gym and no matter how much you try to tell yourself how great you will look if you get yourself to go to the gym, you still don't go. In this case, you will need to focus on the pain of not getting into shape. Imagine how your body and health will be 5 years from now if you don't start taking better care of yourself. Now imagine how you will look 10 years from now, 20 years from now.

The key to making this work is to actually feel the pain you would cause yourself by not taking action. Where would your life be 5, 10, or 20 years from now if you keep letting procrastination take the best of you? If you can make this experience intense enough, it will drive you to take immediate action.

EXCO Resources- Nice Options Play

EXCO Resources, Inc. (XCO)

Here's a nice sizeable covered call strategy on the stock.

• The strategist appears to have purchased 300,000 shares of the underlying stock for a price of $19.30 each
• While selling 3,000 in-the-money calls at the January 2011 $19 strike for a premium of $0.80 apiece
• The sale of the calls effectively cheapens the cost of getting long XCO shares to $18.50 each

Okay now check this out-- 

If the calls are in-the-money at expiration, and the shares are called away from him at $19.00 apiece, the investor exits the position with maximum potential gains of 2.7% on the rise in shares from the effective purchase price of $18.50 to $19.00. If shares cool ahead of expiration, the trader may choose to keep the shares and benefit from bullish movement in the price of the underlying stock at any price above $18.50.

Nice play!

SanDisk SNDK Has Investors Bullish!

SanDisk Corp (SNDK)

Investors are Bullish on SNDK!

Trading traffic is heaviest at the December $50 strike where more than 10,970 calls changed hands last Friday. It looks like the majority of the contracts were purchased at an average premium of $0.70 per contract by investors expecting SNDK shares to hit new 52-week highs ahead of expiration this coming Friday.

• Bulls also picked up another 1,250 calls at the higher December $55 strike for an average premium of $0.12 each
• Optimism regarding prospects for SanDisk's shares spread to the January 2011 $55 strike where some 1,600 calls were coveted at an average premium of $0.96 a-pop
• Other bulls looked to the higher January 2011 $60 strike to purchase 1,725 call options at an average premium of $0.32 per contract

Semiconductor Industry. Market cap of $11.63B. RSI(14) at 76.04. Short float at 6.37%, which implies a short ratio of 1.41 days. The stock has gained 118.12% over the last year.

SLM Corp (SLM) Making Nice Changes, Attracting Bulls!

SLM Corp (SLM)

A barrage of bullish options traders targeted the student loan provider today perhaps on news SLM Corp. will continue to downsize and increase the number of company-wide layoffs to 2,500 by the end of next year.

• Plain-vanilla call buyers expecting bullish movement in the price of the underlying shares to
  continue picked up 1,500 in-the-money calls at the December $12 strike for an average premium of $0.36 each
• Call buying spread to the higher December $13 strike where more than 4,700 call options were purchased for an average premium of $0.14 a-pop

Bulls also targeted longer-dated put and call options to gain upside exposure on the stock. It looks like one strategist sold 10,000 puts at the January 2011 $11 strike for a premium of $0.22 each, in order to purchase the same number of April 2011 $15 strike calls at a premium of $0.22 apiece. The investor responsible for the transaction seems to be predicting a sharp recovery in SLM Corp. shares by April of next year. This is good news for investors!

 

 

Valero Energy VLO here's a Nice Calendar Spread to Consider

Valero Energy Corp (VLO)

A diagonal spread initiated on the operator of refineries within the first ten minute of the trading session suggests one options trader expects the price of the underlying stock to extend gains over the next several months.

• It looks like the investor purchased 6,000 calls at the January 2011 $22.5 strike for a premium of $0.50 each
• Sold the same number of calls at the March 2011 $25 strike at a premium of $0.40 apiece
• The net cost of getting long the nearer-term January 2011 strike contracts amounts to $0.10 per contract

A very nice strategy here.

The trader has locked into the right to purchase shares in Valero Energy Corp. at $22.50 each if
the calls land in-the-money by January 2011 expiration day. VLO's shares must rise at least 6.4% over the current price of $21.14 in order to trade above $22.50. If this occurs, the investor may decide to take ownership of the shares at an effective price of $22.60 each, given the $0.10 net premium per contract paid to purchase the spread today. Profits start to accumulate for the trade should Valero's shares rally 6.9% over the current price of $21.14 to exceed the breakeven price of $22.60.

The short position in calls at the March 2011 $25 strike suggests the investor is willing to have the shares called from him at that price should the options land in-the-money at expiration. If the shares are called from him at $25.00 each, the trader will have managed to walk away with gains of 10.6% on the value of VLO's shares.