Mid-Market Update for 1/18/2017

Goldman Sachs (GS) Shines, Shares Slip

1:25pm (EST)

Futures were showing a slightly higher open throughout the morning and were helped by better-than-expected earnings from Goldman Sachs (GS, $233.87, down $1.87). The company topped expectations after reporting a profit of $5.08 a share on revenue of $8.17 billion. Wall Street was looking for numbers of $4.82 a share on revenue of $7.72 billion.

Shares are slightly lower, again today, as momentum was hurt with yesterday’s pullback and after opening the session relatively flat. On Tuesday morning, I talked about shares either making a 5% run towards $260 or sliding the other way to $235 this week.

The GS January 240 puts (GS170120P00240000, $7.00, up $1.00) came into the week at $2.40 and have zoomed nearly 200% off the two-session backtest towards the 50-day moving average. I also mentioned these options expire this Friday and could be targeted by giddy bearish traders looking for a drop below $235. The puts have traded to a high of $8.40 on the low of $231.55. This pushed the possible gains to 250%.

The GS January 250 calls (GS170120C00250000, $0.10, down $0.22) were at $1.90 ahead of Tuesday’s session and will likely expire on Friday’s close worthless, as long as shares stay below $250. The current loss is 95%.

Both options would have cost roughly $4.50 as a strangle option trade and the premiums in the puts have offset the losses in the calls. I don’t recommend too many directional earnings trades because I often say too many things have to go right. However, if you can target stocks that you believe will make a large enough move, these types of option trades can be profitable.

Taking both aforementioned call and puts options purchased at $4.50, and with a current premium of $7.10, the overall return would be pushing 60%. These types of trades may also be useful, on playing the major indexes when volatility returns, or when we believe the trading range is either going to breakout/ breakdown. Stay tuned.

The bears are taking advantage of additional weakness as the lower end of the trading ranges are coming into play. The Dow is down 42 points to 19,781 while the S&P 500 is off a point to 2,267. The Nasdaq is up 2 points to 5,541 and the Russell 2000 is higher by a point to 1,353.

I have updated our current trades and I’m still hopeful I can get us into a New Trade this afternoon. The action could heat up with Fed Head, Janet Yellen, yapping an hour ahead of the close so stay locked-and-loaded.


Momentum Options Play List

Closed Momentum Options Trades for 2017: 3-0 (100%). All trades are dated and time stamped so new subscribers can look at the past history to see how the trades have played out.

Do not risk more than 5% of your trading account on any one trade but do try to take all of the trades. Please remember, all “Exit Targets” and “Stop Targets” are targets. You should not have any “Hard Stops” entered to close any trades or “Exit Orders” in your brokerage account unless I list one. I will send out a “Profit Alert” or “New Trade” if I want you to close a position or if a new trade comes out. Otherwise, follow instructions at all times in the 8am and 12pm–2pm (EST) updates. Also, I will usually give you a heads-up if I think I’m going to send an Trade Alerts outside of these time frames.


Transocean (RIG, $15.24, down $0.34)

RIG March 17 calls (RIG170317C00017000, $0.55, down $0.10)

Entry Price: $0.66 (1/13/2017)
Exit Target: $1.35
Return: -17%
Stop Target: None

Action: Support is at $15.25-$15. Near-term resistance is at $15.75-$16.


Tower Semiconductor (TSEM, $20.21, up $0.10)

TSEM February 21 calls (TSEM170217C00021000, $0.60, up $0.05)

Entry Price: $0.65 (1/11/2017)
Exit Target: $1.30
Return: -8%
Stop Target: None

Action: Resistance is at $20.75-$21. Support is at $20-$19.75.


Green Dot (GDOT, $25.39, up $0.16)

GDOT March 25 calls (GDOT170317C00025000, $1.45, flat)

Entry Price: $1.30 (1/6/2017)
Exit Target: $2.60
Return: 12%
Stop Target: $1

Action: Resistance is at $25.50-$25.75. Support is at $25-$24.75.


Sprint (S, $8.74, up $0.09)

S February 9 calls (S170317C00009000, $0.40, flat)

Entry Price: $0.54 (1/6/2017)
Exit Target: $1.10
Return: -26%
Stop Target: None

Action: Resistance is at $8.75-$9. Support is at $8.50-$8.25.


Sony (SNE, $30.72, down $0.14)

February 27 puts (SNE170217P00027000, $0.15, flat)

Entry Price: $0.65 (12/23/2016)
Exit Target: $1.30
Return: -77%
Stop Target: 10 cents (Limit Order on half)

Action: Support is at $31-$30.50. Resistance is at $31.25-$31.50.