12:30pm (EST)
We love our job.
Although the market can be frustrating at times, the homework you do can make things easier to deal with during market turmoil and choppiness.
We pulled an all-nighter Sunday night as we did chart work on nearly 50 stocks and the current indexes and we enjoyed every minute of it.
It is like going on a treasure hunt and drawing up maps to find gold. The research is addicting as we listed a number of possible earnings trades and started forecasting where the market will finish by the end of 2014.
Making money while putting the pieces together makes it all that more rewarding.
Futures were up a half-percent ahead of the European markets as the bulls were expecting the newest Fed Head, Janet Yellen, to say good things about the Fed’s taper policy. Her comments came out an hour ahead of the market’s open and she started getting grilled on the Hill 30 minutes after the start of trading.
She sounds like Bernanke with the usual big words and jockeying. The zombies seem to be taking it easy on her as this is technically her first rodeo and the market is benefitting from it.
Shares of Annie’s (BNNY, $38.70, down $3.13) are getting whacked after the company missed earnings expectations by a penny and lowered guidance going forward.
We profiled the stock in our Earnings section for the Weekly Wrap on Sunday night. The company has a short history of letting Wall Street down and shares usually head south after earnings are released. We had a good feeling the company would lower guidance as we have been following them since their Initial Public Offering (IPO) but we also thought there could be an upside surprise so we listed a possible strangle option trade.
The February 45 calls (BNNY140222C00045000, $0.05, down $0.55) opened at 50 cents and traded in a range of 25-65 cents yesterday. They have taken a beating today on the drop below $40.
The February 40 puts (BNNY140222P00040000, $2.00, up $1.10) opened at 80 cents and reached 90 cents after trading down to 65 cents yesterday. They have traded to a high of $2.80 this morning.
The total cost to do a strangle option trade before Monday’s close would have been $1.30, or $130, for 1 contract of each aforementioned call and put option. A 10-contract trade would have cost $1,300. The 1-contract trade would be worth $2.05, or $205 while the 10-contract trade would be worth $2,050.
At current levels, the trade is up over 50% but the return would have over 100% if the options were cashed out or closed at the start of trading. At any rate, this is a good day’s pay for an in-and-out trade in less than 24 hours.
There are one or two earnings trades we like this week and we may recommended one of them in the next day or 2 but today’s New Trade is on a stock we have been following for months and are actively trading.
As we make the turn, the Dow is up 141 points to 15,943 while the S&P 500 is higher by 15 points to 1,814. The Nasdaq is advancing 29 points to 4,177 and the Russell 2000 is popping a 6-pack to 1,125. The S&P 500 Volatility Index ($VIX, 14.45, down 0.81) is down 5% is back below 15. The break past resistance and the VIX is suggesting higher prices and we penciled-in a possible 2% move this week. From there, we should know if the rally continues for the rest of the month or if there is a slow or quick fade from here.
Subscribers, check the Members Area for the New Trade and updates.
