MEMBERS AREA
1:30pm (EST)
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 tradesor “Exit Orders” in your brokerage account unless we list one. We will send out a “Profit Alert” or “New Trade” if we want you to close a position OR if a new trade comes out. Otherwise, follow instructions at all times in the 9am and 1pm updates. Also, we will usually give you a heads-up if we think we are going to send an email outside of these time frames. Closed Trades for 2014: 18-5 – the Weekly Wrap is 8-1 for 2014 (93-8 since 2011) and is designed for traders that want to use options with less risk.
New Trade!!!
Galena Biopharma (GALE, $5.20, up $0.27)
Buy to OPEN April 6 calls (GALE140419C00006000, $0.75, up $0.10)
Action: We like these call options at current levels.
Current Trades
McDonald’s (MCD, $95.09, down $0.83)
March 90 puts (MCD140322P00090000, $0.40, up $0.10)
Entry Price: $0.80 (2/5/2014)
Exit Target: $1.60
Return: -50%
Stop Target: None
Action: The company reported lower same-store U.S. sales for the third-straight month this morning.
The 200-day MA is at $96.22 and a close above this level could lead to $100. We are looking for $96.50 to serve as resistance and a drop back below $94 would be bearish. These are March options and they have over a month before they expire so we have plenty of time for the trade to play out.
Apollo Education Group (APOL, $31.88, down $1.30)
March 29 puts (APOL140322P00029000, $0.55, up $0.20)
Entry Price: $0.50 (2/4/2014)
Exit Target: $1.00
Return: 10%
Stop Target: None
Action: We are looking for resistance at $34 to hold and there is risk up to $36. We believe a drop back below $30 is coming. There is a gap to fill from $30-$27 that should get tested on further weakness.
Caterpillar (CAT, $94.01, down $0.86)
March 85 puts (CAT140322P00085000, $0.35, up $0.05)
Entry Price: $0.75 (1/28/2014)
Exit Target: $1.50
Return: -53%
Stop Target: None
Action: Resistance is at $95 and CAT could also run to $100 on continued strength. We would like to see a close back below $92 over the near-term.
Ariad Pharmaceuticals (ARIA, $8.03, up $0.04)
March 10 calls (ARIA140322C00010000, $0.65, flat)
Entry Price: $0.95 (1/28/2014)
Exit Target: $1.90
Return: -32%
Stop Target: None
May 11 calls (ARIA140517C00011000, $0.95, flat)
Entry Price: $1.05 (1/28/2014)
Exit Target: $2.10
Return: -10%
Stop Target: None
Action: A close above $8 should get $10 in play. Support is at $7 with $6 serving backup.
The water cooler talk is that Eli Lilly has made a “friendly approach” to buy the company and is willing to pay up to $20 a share. GlaxoSmithKline is also in the hunt along with Shire.
We have said there is a HUGE gap to fill on the stock’s drop from $23 to a 52-week low of $2. Eli is trying to get the company for cheap as it currently has a $1.25 billion market-cap.
Exact Sciences (EXAS, $12.37, up $0.16)
April 19 calls (EXAS140419C00019000, $0.45, flat)
Entry Price: $0.88 (1/22/2014)
Exit Target: $1.75
Return: -49%
Stop Target: None
Action: The company should get some FDA news in March on its Cologuard drug. These are April options with 3 months until expiration and we plan to hold through the volatility because we want to be in when the March news is released. We do not have a Stop Limit listed. Support is at $11.75 and we may have to put the trade on hold on a break below this level. However, this will be a major event and we will hold the trade open win, lose, or draw.
Other 2014 Portfolio OPEN positions (2): These are trades that are still open in the portfolio but are down over 50%. They have longer expiration dates and are on “hold” but are not worth mentioning until they turn around. This means we would not open any new positions. We are still keeping track of the trades and we will record the results, accordingly, when we close them or if the options expire. Click on the 2013Portfolio link in the Members Area to view ALL open/ closed trades.
General Electric March 28 calls (from January 2014) – continue to HOLD
Sony February 19 calls (from January 2014) – continue to HOLD
April 20 calls
WATCH LIST SECTION
These trades are NOT recommendations. They are trades that we like but have not added to the portfolio as an official recommendation because of market conditions or because we are waiting for better entry prices. We try not to have more than 12-15 open trades at any one time which is why we created a Watch List. We will not list entry prices because these stocks are on the verge of breaking out or they could sell off but these are the trades we are watching as new candidates.
We will update this section in the morning.
———————————————————
MomentumOptionsTrading.com Morning Update for 2/10/2014
Bulls Look Confident but Still Have Work To Do
9:00am (EST)
“The driver for the bulls warmed the bus up to start the week and was last seen pulling out of Wall Street’s parking lot on Friday. There were only 2 down months in 2013 and for 2014 there has already been one. The losses in January went from not so bad to ugly as the bears broke out of the bottom of the trading ranges and are now free to roam.
The Dow came into January at 16,576 and is down 878 points for the year after falling below its 100-day MA. We mentioned at the beginning of the year (and again last week) and our chart work was showing a possible 3,000 point drop for the blue-chips but we certainly didn’t think nearly a third of it would come in 3 weeks. The 200-day MA is at 15,465 and a close below this level could lead to 14,800 and the October 2013 lows. This would represent a 1,776 point decline, or a little more than 10%.
The S&P 500 started 2014 at 1,848 and held its 100-day MA at 1,769 by a point. A break below this level will likely get 1,750 in play and would represent a 100-point pullback. The 200-day MA is at 1,704 and the October low is at 1,646. If we split the difference it would average out to 1,670 and this level would also represent a 10% pullback.
The Nasdaq rolled into January at 4,176 and is down less than 75 points for the year. Tech closed below its 50-day MA (4,095) twice last week but held this level despite Friday’s volatility. The 100-day MA is at 3,968 and would represent a 200+ point decline, or 5%. The 200-day MA is at 3,734 and a 10% decline would put Tech near 3,750. The October low was 3,650.
The Russell 2000 was at 1,163 to start the year and is down just 33 points. The small-caps experienced daily closes below its 50-day MA (1,140) all week and why we said this would be the first hurdle the bulls would need to clear before thinking about 1,150 and a green light. The 100-day MA is at 1,114 and a close below this level will likely lead to 1,100. This level will be crucial in holding as it would represent a 5% pullback and where fund managers may have to put up or shut up about a buying opportunity. If the pros don’t support the Russell at 1,100 there could be risk to 1,075-1,050. The 200-day MA 1,057 and the October 2013 low is 1,037.
We mentioned the S&P 500 ended December at 1,848.36 and the January Barometer is usually a good indicator on market direction for the rest of the year. As January goes, so goes the year – in theory, and the facts are impressive. The January Barometer has correctly predicted the market’s direction 76% of the time since 1950. With the S&P 500 down over 3%, the odds favor the bears. This number surges to 89% if the “flat years” are backed out, meaning the times the index ended January up or down by less than a half-percent. Even more worrisome for the bulls, is that every down January over the same time frame has been followed with a new or extended bear market, a flat market, or a 10% correction.
Most Wall Street “pros” will say to ignore this indicator because they don’t follow it but we are stock market history buffs and we say the JB needs to be respected.
The mid-December low for the Dow was 15,703 and January’s bottom reached 15,708 last Thursday. We have talked about the importance of the blue-chips holding 15,800 not only as support but more importantly because of the December low.
The “December Low Indicator” is usually a good sign further weakness is ahead if the Dow breeches this level during the first quarter. The bulls did well holding support up until last week and we have said February is a tricky month to trade. The Dow closed at 15,739.43 and when 15,703.79 triggered it issued a sell signal. Last Thursday’s close was 15,738.79 with the low checking in at 15,708.98. This is either the perfect “double bottom” test or a sign a nasty breakdown is coming.
The Monday/ Friday Dow closes have been bearish this year and for our new subscribers, we like to use this indicator to also help us in determining the next trend. There were 3 trading Monday’s in January and the Dow produced losses of 45, 180, and 42 points for a total of 267 points. If we include the Tuesday after the holiday Monday the total losses would be 311 points. There were 5 trading Friday’s in January with 2 up and 3 down. After the first 3 Friday’s, the Dow had gained 62 points on the end of week closes. The last 2 Friday’s have seen the Dow drop 468 points for an overall loss of 406 points on January Friday’s. The total losses on M/F closes for January were 717 points. There are conflicting reports on new money moving into the market but this explains the bigger picture and why we say it is imperative to watch the M/F closes.
Half of the S&P 500 companies having reported earnings so far, and this week will be just as busy as we start to wind down the numbers into February. Nearly 70% of companies are beating Wall Street’s expectations and the rate is above the long-term average of 63%. Roughly 65% of companies are exceeding revenue forecasts and this is above the historical rate of a little over 60%. The volatile price swings should continue into February as the high-beta stocks are moving 5%-10% and even 15%-20+% in some cases but companies are lowering the bar once again for 1Q earnings. These numbers will hit the market in April.
Twitter (TWTR, $64.50, up $1.03) will be the biggest announcement of the week on the earnings front with the company reporting after Wednesday’s close. The February 65 calls (TWTR140222C00065000, $5.65, up $0.35) and the February 65 puts (TWTR140222P00065000, $6.30, down $0.50) are pricing in a 15%-20% move in the stock on the news as can be played as a straddle option trade. It would cost nearly $12, or $1,200, to buy 1 contract of each the call and put option. Shares would need to be above $77 or below $52, technically, by late-February for the trade to breakeven but we doubt it takes shares that long to hit these benchmarks as they could pass one or the other levels in Wednesday’s after-hours trading and on Thursday’s open.
The major economic news for the week will be Friday’s Nonfarm Payrolls report.
There were a number of sell signals issued last week to convince us to take a few short positions and our chart work and analysis are pointing towards continued lows. There were a few times in 2013 where the bulls looked vulnerable and held but this time looks different as a number of headwinds have come into play, including a rising dollar and a possible currency contagion problem.
We will be watching the VIX and the close on Monday along with the major support levels we have outlined. While it is always hard to predict a market top and trading ranges, we have done extremely well preparing for one. We have a few remaining bullish positions from our November and December batch of trades for both our Weekly Wrap and Daily portfolios and while some of these may take a hit, we are looking forward to playing a possible 10%-20% pullback, slide, debacle, or correction. Remember, making money to the downside on a clear trend break can be just as lucrative as playing breakouts with call options. The trick is not to get nervous during these pullbacks, or too aggressive, as snapback rallies are common, but when we say the trend is your friend, it really is.” (from 2/2/2014 Weekly Wrap…)
The headwinds were stiff to start the week as the bears pushed another wave of support and came close to breaking Wall Street’s back. The bulls looked tired from the prior week’s battle and it showed as rebounds were sold through Wednesday before the headwinds became tailwinds. Thursday’s strong rebound ahead of the Nonfarm Payrolls report looked impressive and Friday’s surge past resistance gave the bulls the weekly win (for the most part) despite a non flattering jobs number. (continued…)
The Dow jumped 165 points, or 1.1%, to close at 15,794 on Friday. The blue-chips fell 326 points to start the week and traded to a low of 15,356.17 before closing at 15,372. We mentioned a test and break below 15,450 and the 200-day MA could lead to 15,300. Tuesday’s low reached 15,356.62 and we mentioned it could be a short-term “double bottom” as the index finished at 15,445 and up for the session. Wednesday’s low reached 15,340 and represented a 100-point decline before a slightly negative finish (-5 points). The flat finish indicated another dull day on Thursday ahead of the Nonfarm Payrolls report but the index soared 188 points to 15,628 and cleared 15,600 along with the 200-day MA (moving average). We said the next layer of resistance was at 15,750-15,800 and Friday’s run reached a peak of 15,798. We said not to trust any rebound until 16,000 clears and more conservative traders might not buy into any rally until 16,100 and the 50-day MA clears. Support is at 15,600 and then 15,400-15,350 again on another pullback. For the week, the Dow gained 96 points, or 0.6%, after starting at 15,698 and is down 782 points, or 4.7%, for 2014.
The S&P 500 soared 23 points, or 1.3%, to finish at 1,797. The index dropped 40 points on Monday and quickly fell below its 100-day MA to a low of 1,739 before ending at 1,741. We had penciled-in a near term test to 1,750 as this level was stretched before Tuesday’s rebound to 1,755. Wednesday’s low reached 1,737 before the S&P bounced to hold 1,750 with a point-and-a-half close above support. Thursday’s run reached 1,774.06 and we wanted to see a close above 1,775. The finish at 1,773 and the 100-day MA still made us nervous into Friday but it was close enough for zombie work as the S&P kissed 1,798 on Friday. The rally fell short of triggering 1,800 and the 50-day MA and where we might get back on board but there is further resistance at 1,810 and then 1,825 to get through before we would say the selling pressure is over. Support is at 1,775 and prior resistance followed by 1,750. The S&P 500 came into the week at 1,782 and added 15 points, or 0.8%, by Friday’s close. For the year, the index is down 51 points, or 2.8%.
The Nasdaq zoomed 69 points, or 1.7%, to close at 4,125 on Friday. Tech tried to hold 4,100 after pushing 4,113 on Monday’s open but tumbled 107 points to close below the 4,000 level at 3,996. We mentioned last week a test to the 100-day MA was likely if 4,050 failed and the low checked-in at 3,989. The bears would have to wait another day though as Tuesday’s rebound reached 4,044 with a close of 4,031. Wednesday’s drop to 3,968 confirmed the back test as the index held 4,000 by the close by 11 points. Thursday’s pop to 4,057 was a good sign the bulls would push 4,100 on continued strength and Friday’s high was 4,126. The next wave of resistance at 4,185-4,200 will be a major challenge but if cleated could lead to our prior fluff target of 4,400-4,500 for the Nasdaq. The Nasdaq was at 4,103 and advanced 22 points, or 0.5%, and is off 51 points, or 1.2%, year-to-date.
The Russell 2000 roared a dozen points, or 1.1, to settle at 1,116 on Friday. The small-caps had a negative Monday and pushed 1,091 before closing at 1,094. The break below the 100-day MA and the 1,100 level was extremely disappointing for the bulls as this level had held since mid-December. We said there could be risk to 1,075-1,050 last week and after a rebound to 1,102 on Tuesday, Wednesday’s low reached 1,082 with a close at 1,093. A lower low suggested weakness on Thursday but the bounce back above 1,100 to 1,103 was a bear killer. We mentioned midweek a close back above 1,100 can’t be trusted until 1,115 clears and that we got on Friday with the index closing just off session highs. The Russell came into Monday’s open at 1,130 and fell 14 points, or 1.3%, for the week and is lower by 47 points, or 4.1%, YTD.
The S&P 500 Volatility Index ($VIX, 15.29, down 1.94) fell 11% and tested 15.09 on Friday. The VIX came into the week at 18.41 and we mentioned it looked poised to trip 20 and test 22. Monday’s high reached 21.48 with a close of 21.44. Tuesday’s drop back below 20 was a good sign the selling pressure might ease as the VIX nearly recouped all of its losses and closed just a half-point off the prior Friday’s close to settle at 19.11. The VIX did pop back over 20 again on Wednesday to 20.72 and closed higher at 19.95 but held 20. We mentioned a close back below 17.50 would be bullish and Thursday’s trip to 17.23 did the trick. We then said Friday morning the bulls needed to get below 15 for a continuation rally and Friday’s low reached 15.09. A close below 14-13.50 would be more convincing for us but the VIX continues to provide us with great clues despite the whipsaw action.
The bulls needed to get off to a good start for the week but Monday’s (and Friday’s) have belonged to the bears so the odds weren’t good. We mentioned February would be a tricky month to trade and the first week made Wall Street’s head spin.
The Dow fell 358 points to its midweek low before surging 458 points to end the week with nearly a triple-digit gain. The 816 point move represented a 5% one-week swing. The S&P 500 came within spitting distance of triggering 1,800 after making a 45-point swing, or nearly 3% from the low to the high.
The suit-and-ties came into the week worried about the Chinese markets and the Lunar New Year, the Japanese market that was in bear market territory, the opening of the Sochi Olympics, and the Nonfarm Payroll report. Oh, and the debt-ceiling debate.
The dark clouds hanging over these events got stormy but suddenly seemed to clear following the snapback rally. The suit-and-ties that were calling for the magical 10% correction and suggested staying short quickly had changed their minds by Friday’s close.
China’s market reopened without a hitch and Japan’s Nikkei also made a strong comeback off their lows. The Sochi Olympics have been uninterrupted although there have been some more serious “incidents” besides the roaming dogs and Bud Light looking drinking water.
As far as the debt-ceiling, Treasury Secretary Jack Lew warned the zombies and the White House that the Treasury would run out of cash by the end of the month. The Republicans (and Democrats) can’t afford another government shutdown as they are trying to gain (or keep) control of the Senate. Both sides might throw some punches but most economists believe the zombies will once again kick the can down the road and avoid a default.
The Nonfarm Payrolls were debated all day and the zombies did their best to convince Wall Street it was a “good” number. The 113,000 jobs number was “better” than December’s print of 75,000 that were “revised” by just 1,000 but the the labor force participation rate dropped to a 35 year low. The funny numbers we often mention the zombies report can be debated but this fact cannot as the unemployment rate FELL to 6.6%.
This puts the Fed within their 6.5% targeted rate for a continuation of taper cuts but the market may have rallied on hopes the Fed might stop tapering. This could be a dangerous game the bulls are playing with Janet Yellen speaking on Tuesday. This will be her first testimony to Congress on the state of the economy and her comments could seriously impact the market for better or worse.
The technical picture did seem to change in 48 hours but the one warning sign is that it came on low volume. We covered the “December Low Indicator” last week for the Dow and while the S&P 500 ended the week higher, it also breached its December low of 1,767.
The current action is suggesting another 2%-3% possible upside for February but we believe March could be full of earnings warnings as companies blame the weather. 4Q earnings will be winding down following the busiest two weeks of the season and major Tech and blue-chips have already reported. There will still be plenty of possible earnings trades over the next few weeks but analysts are already looking ahead.
One sector we will be watching for a continued run higher are the Financial stocks. The Financial Select Spiders (XLF, $21.29, up $0.26) will need to clear $21.50 and the 50-day MA to keep the momentum going. We could long if this level is cleared by using the March 22 calls (XLF140322C00022000, $0.18, up $0.06) as a cheap way to play continued strength. A drop below $20.50 would be bearish.
We have been analyzing the 10 and 15-year charts for the indexes over the past few weeks and we will be making our annual yearend predictions next weekend. This week should give us the clues we need to see if a continued rally is in store or if lower lows are on tap.
As we head to press, futures are showing a mixed open to start the week: Dow futures are down 3 points to 15,736 while the S&P 500 futures are lower by 2 points to 1,792. The Nasdaq 100 futures are up a point to 3,559.
Special Notice: We have a NEW TRADE we are getting into on Monday’s open so please read the instructions carefully.
MEMBERS AREA
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 tradesor “Exit Orders” in your brokerage account unless we list one. We will send out a “Profit Alert” or “New Trade” if we want you to close a position OR if a new trade comes out. Otherwise, follow instructions at all times in the 9am and 1pm updates. Also, we will usually give you a heads-up if we think we are going to send an email outside of these time frames. Closed Trades for 2014: 18-5 – the Weekly Wrap is 8-1 for 2014 (93-8 since 2011) and is designed for traders that want to use options with less risk.
McDonald’s (MCD, $95.92, up $0.98)
March 90 puts (MCD140322P00090000, $0.30, down $0.20)
Entry Price: $0.80 (2/5/2014)
Exit Target: $1.60
Return: -xx%
Stop Target: None
Action: The 200-day MA is at $96.22 and a close above this level could lead to $100. We are looking for $96.50 to serve as resistance and a drop back below $94 would be bearish. These are March options and they have over a month before they expire so we have plenty of time for the trade to play out.
Apollo Education Group (APOL, $33.18, down $0.23)
March 29 puts (APOL140322P00029000, $0.35, flat)
Entry Price: $0.50 (2/4/2014)
Exit Target: $1.00
Return: -30%
Stop Target: None
Action: We are looking for resistance at $34 to hold and there is risk up to $36. We believe a drop back below $30 is coming. There is a gap to fill from $30-$27 that should get tested on further weakness.
Caterpillar (CAT, $94.87, up $1.04)
March 85 puts (CAT140322P00085000, $0.30, down $0.15)
Entry Price: $0.75 (1/28/2014)
Exit Target: $1.50
Return: -xx%
Stop Target: None
Action: Resistance is at $95 and CAT could also run to $100 on continued strength. We would like to see a close back below $92 over the near-term.
Ariad Pharmaceuticals (ARIA, $7.99, up $0.82)
March 10 calls (ARIA140322C00010000, $0.65, up $0.20)
Entry Price: $0.95 (1/28/2014)
Exit Target: $1.90
Return: -32%
Stop Target: None
May 11 calls (ARIA140517C00011000, $0.95, up $0.25)
Entry Price: $1.05 (1/28/2014)
Exit Target: $2.10
Return: -10%
Stop Target: None
Action: A close above $8 should get $10 in play. Support is at $7 with $6 serving backup.
The water cooler talk is that Eli Lilly has made a “friendly approach” to buy the company and is willing to pay up to $20 a share. GlaxoSmithKline is also in the hunt along with Shire.
We have said there is a HUGE gap to fill on the stock’s drop from $23 to a 52-week low of $2. Eli is trying to get the company for cheap as it currently has a $1.25 billion market-cap.
Exact Sciences (EXAS, $12.21, up $0.34)
April 19 calls (EXAS140419C00019000, $0.45, up $0.05)
Entry Price: $0.88 (1/22/2014)
Exit Target: $1.75
Return: -49%
Stop Target: None
Action: The company should get some FDA news in March on its Cologuard drug. These are April options with 3 months until expiration and we plan to hold through the volatility because we want to be in when the March news is released. We do not have a Stop Limit listed. Support is at $11.75 and we may have to put the trade on hold on a break below this level. However, this will be a major event and we will hold the trade open win, lose, or draw.
Other 2014 Portfolio OPEN positions (2): These are trades that are still open in the portfolio but are down over 50%. They have longer expiration dates and are on “hold” but are not worth mentioning until they turn around. This means we would not open any new positions. We are still keeping track of the trades and we will record the results, accordingly, when we close them or if the options expire. Click on the 2013Portfolio link in the Members Area to view ALL open/ closed trades.
General Electric March 28 calls (from January 2014) – continue to HOLD
Sony February 19 calls (from January 2014) – continue to HOLD
April 20 calls
WATCH LIST SECTION
These trades are NOT recommendations. They are trades that we like but have not added to the portfolio as an official recommendation because of market conditions or because we are waiting for better entry prices. We try not to have more than 12-15 open trades at any one time which is why we created a Watch List. We will not list entry prices because these stocks are on the verge of breaking out or they could sell off but these are the trades we are watching as new candidates.
Galena Biopharma (GALE, $4.93, up $0.66)
April 6 calls (GALE140419C00006000, $0.65, up $0.20)
January 7 calls 2015 (LEAPs) (GALE150117C00007000, $1.30, up $0.35)
Thoughts: Shares fell 20% yesterday and could be getting interesting. Remember, it was just a few weeks ago we were playing double-digit Price Targets wars with some of the Wall Street brokerage firms. We have added the LEAPs to play a longer-term trade.
Zoetis (ZTS, $30.70, up $0.65)
February 32 calls (ZTS140222C00031000, $0.50, up $0.20)
March 32 calls (ZTS140322C00032000, $0.35, up $0.10)
April 32 calls (ZTS140419C00032000, $0.65, up $0.15)
Thoughts: The company is expected to earn 34 cents a share on revenue of $1.2 billion. They disappointed Wall Street last time out by missing by 16 cents a share so there is risk if they miss again.
Shares seem to have bottomed and could push their major MA’s on a good earnings report on Tuesday morning. We would have to enter the trade before Monday’s close to get in on the action and the April 32’s are the calls we are leaning towards if we do get in.
Philip Morris (PM, $80.25, up $2.14)
March 75 puts (PM140322P00075000, $0.40, down $0.35)
Thoughts: We would like to see a continued run to $82-$83 and where we could get the opportunity to short this one again. However, if shares fall below $77.25-$77, we may not get that opportunity and where we could pull the trigger a little quicker.
Krispy Kreme Doughnuts (KKD, $17.41, up $0.39)
March 15 puts (KKD140322P00015000, $0.35, down $0.15)
March 16 puts (KKD140322P00016000, $0.65, down $0.15)
Thoughts: Resistance is at $17.50-$18 and where we would like to see a back test to continue.
Annie’s (BNNY, $41.96, up $0.45)
February 45 calls (BNNY140222C00045000, $0.50, up $0.15)
February 40 puts (BNNY140222P00040000, $0.65, down $0.40)
Thoughts: Shares could move 10% or more on Monday’s earnings announcement after the close. However, the bid/ ask is a little wide and will need to be worked to get fills.
Alkermes (ALKS, $50.14, up $2.57)
February 55 calls (ALKS140222C00055000, $0.50, up $0.10)
Thoughts: The chart looks bullish for a continued run higher.
Trimble Navigation (TRMB, $31.98, up $0.69)
February 32.50 calls (TRMB140222C00032500, $0.85, up $0.20)
February 30 puts (TRMB140222P00030000, $0.50, down $0.30)
Thoughts: Shares made a move from $29 to $34 following the last earnings announcement in November (red box) and could zoom past $34 or fall below $29 on Tuesday afternoon’s numbers.
Sketchers U.S.A. (SKX, $28.99, up $1.21)
February 30 calls (SKX140222C00032000, $0.90, up $0.45)
February 28 puts (SKX140222P00028000, $0.75, down $0.20)
Thoughts: Shares have been volatile of late and usually make dramatic moves around earnings. A strangle (or straddle) option trade might be the best way to play Wednesday’s afternoon’s news.
Avon (AVP, $14.80, up $0.26)
February 15 calls (AVP140222P00014000, $0.75, up $0.05)
February 14 puts (AVP140222P00014000, $0.55, down $0.10)
Thoughts: The company reports earnings Thursday morning. This could be a good strangle trade at current levels.
Cliffs Natural Resources (CLF, $20.82, up $0.01)
February 22 calls (CLF140222C00022000, $0.65, down $0.02)
February 19 puts (CLF140222P00019000, $0.52, down $0.02)
Thoughts: Earnings are due out after the close on Thursday.
Constant Contact (CTCT, $26.00, up $0.23)
March 25 puts (CTCT140322P00025000, $1.00, down $0.05)
Thoughts: Shares are trying to hold their 100-day MA but could be on the verge of a drop to $21-$20. This could also be a good short candidate for our Weekly Wrap.
S&P 500 Spiders (SPY, $179.68, up $2.20)
February 181 calls (SPY140222C0018100, $1.20, up $0.60)
February 175 puts (SPY140222P00175000, $0.56, down $0.91)
March 170 puts (SPY140322C00165000, $1.03, down $0.70)
Thoughts: We could also play a strangle option trade for next week with these options if there is a flat open but that is unlikely. We can adjust to use different options after the open to adjust the trade with different calls and puts but chances are the next trend will last into next week. We have added the March puts if resistance holds and we want to get aggressive.
iShares Russell 2000 (IWM, $110.75, up $1.24)
February 107 puts (IWM140222P00107000, $0.60 down $0.50)
March 100 puts (IWM140322P00100000, $0.57, down $0.37)
Thoughts: We could go short on a drop below $108.