Highlight Reel

Recent Highlights from Options Hawk Option’s Radar Analysis

* The original stories can be found in Options Radar and Options Radar Archives by simply searching the ticker using the Ctrl+F function.

 

* Due to time constraints I have stopped with highlights, because there are too many to track.

6-5-2009—6-19-2009

Rigel Therapeutics (RIGL) was highlighted on June 8th with bullish call activity with shares at $9.70, and they traded to $12 a week later. 

Smuckers (SJM) shares tore 10% higher on a major earnings beat a few weeks after I noted very bullish call option activity, and the aforementioned calls more than tripled in value.

Savient (SVNT) shares jumped from $6 to above $12 on FDA approval of its Gout drug after weeks of bullish activity I was writing about in the options market.

Matrixx (MTXX) was an early catch with bearish activity as shares traded lower on June 16th at $17 per share, and then news came out that its top selling product was being pulled from the shelves by the FDA and shares fell intraday 70% to around $5.50.

A-Power (APWR) was highlighted in a June 15th piece ahed of earnings with bearish activity, and shares fell from $13 to $8 in the next few days!

Abbott Labs (ABT) was the focus of a bullish story on June 11th for the underperforming large Pharma company with shares trading around $44.  Within the next week shares climbed 10% higher to above $48.

NelNet (NNI) was highlighted on June 11 as seeing unusual call activity with bullish flow and a week later the company won big contracts from the Dept. of Education and shares rose 32% in a single day, and rose another 10% the following day, with huge spikes in the call options value.

Sotheby’s (BID) was highlighted on June 10 with near term call activity and shares rose from $12.40 to $15.40 in the next few days due to foreign auctions with a better than expected turnout.

Potash (POT) was featured as a 15K block of puts was bought on June 8th, and I noted that there was bearish divergence and shares were due for a sharp pullback.  A week later news out of Germany caused the fertilizer stocks to sink, and POT shares fell more than $11 in a single day and continued lower, making the put options very valuable to own.

RTI Int’l (RTI) shares exploded 17% higher the day after posting a bullish options story on the titanium producer, allowing for 300% gains in calls in just a one day turnaround.

Euro (FXE): The FXE came under pressure the day after I noted bearish put buying in the Euro, taking the FXE from resistance at $143 to near $138 in just days, making the puts very valuable as volatility also picked up and put activity continued on the overbought Euro.

Sallie Mae (SLM) was pumped by Cramer as a double for 2009 and shares soared another 17% to $8, well above the $6 price tag when I noted bullish call buying, allowing for 200% plus gains in the options market.

Fairchild Semi (FCS) shares jumped from $7 to $8.50 in 2 days after my bullish call option story, with shares rallying on comments made at an investor conference just 1 day after my story.

Cedar Shopping (CDR): On May 6th I mentioned the unusual October call buying in the REIT and shares were at $4.  Shares recently touched $5.50, a very large gain, although the option trader is holding for further upside.

Turkcell (TKC) shares moved from under $12 to above $14 in just 2 weeks from a May 14th story of bullish call activity.

Acorda (ACOR) shares were trading at $22.50 on May 14th when I mentioned the very bullish spread bets being made and two weeks later are trading above $26.

China Medical (CMED) shares were trading at $19.50 on May 15th when I wrote about large amounts of September $20 call buying.  By June 5, shares were at $25, a 30% gain in shares and much more in the call options.

Advanced Energy (AEIS) shares were at $8.30 on May 18th when I noted unusual call action in the usually thinly traded name with July $10 calls.  Shares are trading at $10.30 as of June 5th!

Statoil (STO) was the focus of a massive July $17.50 call buy late on May 19th with shares at $20.50.  Shares touched $22 recently and were upgraded today at Goldman.

Int’l Gaming (IGT): A May 21st story with shares below $15 about June $17.50 call buying and shares as of June 5 are at $17, with room to run higher.

Photronics (PLAB) was an unusual stock to see heavy options trading on May 22 with shares below $3, and as of June 5 the shares are near $4, a 33% gain.

Ultimate Software (ULTI) was a story I wrote about on May 26th with call activity very unusual and bullish.  Shares were below $20 and then went parabolic, and as of June 5 the shares are at $26.

Axsys Tech (AXYS) saw bullish activity in call options on May 26 on wide spreads, and on June 4th General Dynamics offered $54/sh in a takeover offer.  Nearly a 20% move in shares.

Pioneer Natural (PXD) traded from $24 to $30 following a May 26th bullish options story I wrote.

 

3-30 to 5-29 2009

Enzon Pharma (ENZN): After noting unusual call activity the shares of the BioTech stock broke to new highs and the options gained 100% in 2 days.

ViroPharma (VPHM): After noting unusual call activity the options I recommended buying gained 200% intraday!  Implied volatility soared as more caught on ahead of FDA data,

Yingli Green (YGE) was on the hot options list for many days through early May and by the end of May the shares hit new highs as we banked 300%+ gains in the call options.

Newmont Mining (NEM) was the focus of a bullish options story with shares below $46 and shares gained $3 in the next three days, breaking to new recent highs.

NetApp (NTAP): On 5.21 I noted that bullish call bets continued in NTAP despite the share decline to under $17 after announcing a large acquisition, and by May 29 shares were back near $20, a nice gain for the call options.

Linn Energy (LINE): Shares gained from $17 to $20 in just 1 week after a bullish story on the call options and volume continued to pick up in shares as well.

Data Domain (DDUP): Almost exactly 1 month after noticing unusual call action and theorizing that DDUP could be a stock in play, NTAP bought the firm for a 35%+ premium, and shares of DDUP were up 100% total since my story.

Citrix Systems (CTXS): Noted early morning call buying in CTXS and got calls for $1.  Then action went crazy with more than 50,000 trading and calls soaring to $2.30, a big intraday gainer.  Later in the day CSCO takeover chatter was attributed to the action.

Aruba Networks (ARUN): Noted very strong call buying in ARUN weeks up to its earnings report and shares had strong technical pattern.  Shares were 30% higher post-earnings, and calls moved from $0.25 to $1.50 after my story was printed.

Red Robin Burger (RRGB): Noted that puts were being bought a week ahead of earnings very bearishly and shares looked likely to turn lower,  Shares fell 20% after earnings and put values soared.

F-5 Networks (FFIV): Just 3 days after noting bullish July call buying, shares broke out and I recommended taking profits in the Trading Hub Chat, up 120% in 3 days.

C-Trip (CTRP): Shares soared 20% after earnings and a bullish story regarding the May calls that gained more than 500% throughout the day.

Foundation Coal (FCL): Just a few days after a bullish story regarding out of the money calls in FCL, the company was acquired by Alpha Natural for a 32% premium, sending call option prices soaring.

Fossil (FOSL): This was a small but unusual trading of calls that I noticed the day ahead of earnings, and shares jumped more than 15% on earnings, with the calls rising three-fold.

Telefonica (TEF): Another small but unusual call amount, netted a 55% gain on calls a few days after the activity. 

MicroChip (MCHP): Noted unusually strong bearish sentiment as shares hit new highs around $24, and shares fell to around $20 in 10 days following the story.

MGM (MGM): Just a day after a bearish options story, shares fell 33% after announcing a common stock offering, and then another 20% in days following the offering.

Hill Rom (HRC): This was a pre-earnings call where the stock had good valuation and high short interest along with peculiar options action.  Shares rose 14% on earnings despite a weak tape.

Anadarko (APC): On May 11 I noted a large front month bearish spread on APC, and shares fell more than 4% after hours after the company announced a 30M share common stock offering.

Alpha Natural (ANR): Shares of the coal producer jumped from $20 to over $32 in the 5 days following my note of very bullish OTM call buying, and the calls I recommended rose more than 400%.

XTO Energy (XTO): XTO was the focus of a very risky but bullish strategy I noted and also saw similar action in other Nat Gas names, and XTO climbed from $35 to over $45 in less than 5 days after my story, and Natural Gas began to rise sharply as well.

Granite Construction (GVA): GVA shares rose from $40 to $46 on earnings after I noted bullish positioning in the options market.

Lamar Advertising (LAMR): Noted a very large bullish play in LAMR and the high short interest that made it a solid play, and shares jumped nearly 30% after posting better than expected earnings 2 weeks after my story.

Nice Systems (NICE): Noted bearish positioning in puts ahead of earnings and shares fell from $26 to $21 days following earnings.

Yingli Green (YGE): Shares were around $6 on 4/29 when I noted the bullish action in the China Solar play, and rose to more than $10 in early May, a 40% move, although bullish action continues today on May 11.

Terex (TEX): Noted bullish OTM call buying at the offer in TEX and shares rose 17% the next day, although there is still time for a bigger move and I will check back.

Manitowoc (MTW): Noted that MTW had made a far run but could pull back on debt concerns and just two days later the company announced debt issues and shares tanked more than 12%.

MGIC Investments (MTG): Shares rose from $2.50 to $3.10 following my story on 4/17, nearly a 25% jump.  Shares touched $6 in early May, more then a double.

Brunswick (BC): In the few days following my bullish story on the boat maker, shares rose more than 25%.  A few days later shares had doubled.

Patriot Coal (PCX): On March 19th I highlighted activity in PCX when shares were at $4, and shares finished April near $8 and touched $10 in early May.

Bucyrus (BUCY): Noticed extensive call buying in the coal miner shares a day before Massey (MEE) earnings.  Shares of BUCY climbed more than 15% over two days, while the coal sector as a whole exploded higher the following day.

Bare Escentuals (BARE): Had multiple stories regarding this low dollar stock and that it was undervalued and traders were buying calls in large lots.  Shares rose 40% the day of earnings, and then another 10% the following day, but climbed a total of more than 100% from my original story less than a month ago.

Beazer Homes (BZH): Noted the heavy buying of calls in the low dollar homebuilder, and the next day shares rose 33% and the option valued climbed by even more. 

Shaw Group (SGR): Early mention of bullish action and a takeover rumor made for huge intraday gains, well over 200% in the options, and shares continued another 16% higher over the next two days.

Sealed Air (SEE) Another one of the packaging stocks I highlighted with bullish call activity, and a great play in the sector, shares rose 33% just over a weeks time.

Fushi Copperweld (FSIN): The day after I noted unusual action in the call options for a thinly traded stock and that I liked the valuation and set-up, shares rose 30% and traded 1.1 million shares, 10X the average volume.

Ariba (ARBA): The day prior to earnings I noted a lot of bullish buying of calls and that shares wee near breaking out.  Shares rose 15% on earnings and the call options more than doubled intraday.

AMAG Pharma (AMAG): Shares soared from $45 to $55 intraday on earnings, just a week or so after noting bullish action in the calls.

Cameco (CCJ): Noted a large bullish spread trade on shares that rose 8% the day after the note, and another 9% the day following, and the call options more than tripled.  Shares rose a total of 25% over the next week.

Conceptus (CPTS): Another under the radar pre-earnings play with high short interest and shares rose 15% after earnings.

Acorda (ACOR): Noted a large strangle trade on shares just days before drug data sent shares 20% higher.

RiverBed (RVBD): The bullish action in Riverbed started around a month back and shares have doubled since then, but a more recent post the week ahead of earnings was timely with shares rising 23% after earnings.

Robert Half (RHI): Noted the unusual call volume and also mentioned it was call sellers ahead of earnings and shares fell 10% on earnings as call sellers were able to buy back the calls for a handsome profit.

Deluxe Corp (DLX) and Data Domain (DDUP): Two pre-earnings bullish unusual action and DDUP rose 11% on earnings, while DLX rose 14% and then another 14% the following day.

Agco (AG): A takeover rumor that first speared here with the options action sent shares up 11% intraday and options more than doubled.

Monarch Casinos (MCRI): On 4/2 I noted bullish call action in many of the smaller casino names such as MCRI, HST, HOT, ASCA and WYN and most have doubled or more since then.

Sears Holdings (SHLD): In late March with shares near $43 I noted the massive OTM call buying, and by April expiration shares closed around $63!

Ad Tran (ADTN): Noticed unusual call buying ahead of earnings for a stock that had risen sharply during previous earnings calls, and shares tore 10% higher on earnings, and followed that up with another 7% move higher.

Intel (INTC): Noted that I felt the flow of options volume was bearish and also noticed the put buying in the SMH of which INTC is a large component.  Intel, subsequently, traded lower following earnings.

Infosys (INFY): Noted unusual action in the ITM puts for INFY, and the company came out a few days later with poor quarterly results that drove shares 8% lower and took a toll on the Indian market.

Southwest Air (LUV): Shares fell 13% the day after I noted heavy low strike put buying as earnings failed to impress.

Regions Financial (RF): Noted strong intraday call buying and very bullish flow when shares were up 10%, and shares continued higher closing 30% up, and another 10% gain the following day, and the call options more than tripled in value.

Gamestop (GME): Despite the markets rallying and bullish sentiment in most stocks, I noted very heavy put action in GME on two occasions during options expiration week. As it turns out the company fell on competitive threats from Target and other issues, from $32.50 to $28.80 in a matter of days when the market soared.

Nuance (NUAN): A rumor of MSFT looking to buy the company barely moved shares but I noted the jump in volatility and that the deal would make a lot of sense, and shares took off more than 13% at a point the next day.

E-Trade (ETFC): Another gem of a low dollar financial with bullish action I noticed with E-Trade shares around $1.50, and shares closed just 4 days later at $2.70, a massive gain.

NII Holdings (NIHD): This was a case where I dispelled a takeover rumor because I did not believe in the action I was seeing in the options market and in the implied volatility.  NIHD shares were up 6% on the day of the rumor and I recommended selling calls, and a few days later shares fell nearly 20% as subscriber growth numbers were below consensus.

Cosan (CZZ): This was a stock where I saw some unusual volume, although nothing big enough to signal most sites that track options action.  I also noticed increasing volume in shares of CZZ.  Shares of CZZ rose from $3 to over $5 in a few days after my note, and later rumors that Petrobas (PBR) may be looking at the company came around.

Unit Corp (UNT): Noted the bullish action on 3/30 with shares of UNT around $21 and shares closed on 4/9 at $26. Closed near $29 on 4/17.

SLM Corp: Noted call activity in the low dollar stock on 4/7 with shares around $5.50, and shares closed on 4/9 at $6.69, more than 20% higher in 2 days.

Textron (TXT): I noted the original takeover rumor well before any other market source and TXT shares rose more than 12% although I continued to like the action I was seeing.  Days later a more specific takeover rumor took shares 75% higher in pre-market and the options I recommended buying were up more than 2,500%.

Teck Cominco (TCK): This was a smaller name that I noted was looking to sell assets and a good value with some unusual call buying for consecutive days.  A few days after my story a rumor broke that BHP was looking to buy the company for $11/share.  Shares of TCK rose more than 15% in the days following my story while the calls more than tripled as volatility soared.  Shares rose from around $5 to near $10 in under 10 days.

Cardiome (CRME): This one took a while to play out but I noted some unusual activity in the ITM calls in the front month, and the week before expiration a licensing deal with Merck was announced that sent shares more than 40% higher and calls doubled in value.

OshKosh Trucking (OSK): Shares rose more than 15% in the days following my story regarding call buying in OSK.  Shares neared $11 from $6 just around 10 days after my story. 

Bare Escentuals (BARE): I noted continued bullish buying of calls in the beaten down stock and theorized it to be a potential acquisition target.  Shares rose nearly 20% in trading on Friday and the calls more than doubled.

CBS Corp (CBS): CBS was another low dollar stock with bullish call buying and I presented the saving of the autos as a potential catalyst.  CBS shares climbed from $4 to $5.36 in the days following and the calls more than tripled in value.  Shares rose 20% on options expiration, 4.17, closing at $6.70, around 66% higher.

Harman Industries (HAR) and Diebold (DBD): Two takeover rumor stocks where I liked the bullish action and scalped a quick 200+% on the trades just by monitoring the activity in the options market to give buy and sell signals.  Shares of both headed much higher the following days.

Cubist Pharmaceuticals (CBST): Noted at 9:35am, before any other media source, the unusual call buying right off the open which was followed by rumors of a possible Novartis $26 bid for the company that it had prior relationships with, and I specifically mentioned the April $17.50 calls trading for $0.50.  Shares of CBST ended the day 22% higher with the calls trading at $2.85, while the further OTM calls were up more than 1,000% intraday!  I followed up throughout the day noting that implied volatility continued to rise, a bullish sign for the rumor gaining traction, and gave holders the chance to re-load intraday as shares dipped and traded just 3% higher mid-day.

International Gaming Tech (IGT): I had a great early morning call in IGT options trading, when not many had seen the heavy volume bullishly flowing into calls.  Shares were barely up at the time of my discovery, but closed the day up 16.37%, and options traded 100% higher.

Host Hotels (HST) and other Casino Stocks: I noted unusual call buying in several casino and hotel related names, and the following day MGM announced a financing deal that sent shares of the stocks mentioned soaring, anywhere from 15% to 40%, and calls tripled or more in many cases.

Intercontinental Exchange (ICE): Calls were very active on rumors of a possible bid from Deutsche Bourse with shares trading around $76 and calls at the $90 strike and higher being bought.  After an upgrade the following day, shares had already climbed to $85, a large 24 hours gain, especially for the option traders.

Mastercard (MA): On 4/1 I noted a very large 10,000 contract call spread on shares that was way out of the money with shares at $160 on a down day and the spread needing a May close above $200.  There still is more time to go here, but shares are at $174 less than 3 days later.

Solutia (SOA): On 3/30 I saw very unusual call action in a thinly traded stock and dug up some research to note that Q1 was near an end and the company was intending to sell its Nylon business that would help with liquidity.  Shares were trading around $1.80 and closed a week later at $2.35, nearly a 30% gain.  The following day shares rose to $2.60, 44% higher.  On 4/9 shares closed above $3, more than a 66% gain from my first note in shares, and options were up more than 600%.  On 4/17 shares closed at $3.94, more than a double in the equity.

Electronic Arts (ERTS): Early on 3/31 I noted a large bullish April $20/21 call spread with shares at $18.25, and by 4/3 shares were reading near $21, a 15% climb in shares and putting the call spread right near max profit for the large trader.

Ashland (ASH): Calls were receiving a lot of buying interest on 3/26 on some vague rumors regarding the company being up for sale, and shares were trading at $9, and the implied volatility and action added up to make me feel there was something to it.  A week later shares closed at $13.65, more than a 50% gain in share price and the $0.15 option contracts were pricing for $1.60, more than a 1,000% gain.  Shares rose from $9 to $18.11 from 3/26 to 4/17.

BEBE Stores (BEBE): Noted unusual call activity in shares at the $7.50 strike on 3/25 when shares were trading at $6, and the call activity continued a week later with shares closing around $7.50, a 25% move in shares.  On 4/17 shares closed around $8, a 33% move in shares.

3-20 to 3-27 2009

Shanda Interactive (SNDA): On 3.23 Shanda continued to see bullish call activity I picked up on even as shares pulled back to around $35.  3 days later shares broke above $40.  Shares hit $50 a week or so later.

USG Corp (USG): On 3/17 I noted unusual buying of calls at the April $7.50 strike with shares at $6, and just 10 days later shares are at $8.82.  Shares were at $11.40 by April expiration, nearly a double.

Allergan (AGN): On 3/23 I noted heavy call buying in Allergan in a bullish manner and the next day there were takeover rumors.  Shares traded from $41 to above $51 in just 4 days after the call, with options up more than 1000% in some cases.

Form Factor (FORM): On 3/20 shares of FORM were trading at $16 when I noted 38X normal call activity, bullish, and just 1 week later shares touched $19.

Solar Stocks (TAN): I noticed very heavy call buying in many of the solar stocks and noted the arbitrage opportunity in the ETF, TAN, as well.  The ETF moved from below $7 to above $7.50 the day I made the call and solar stocks soared nearly 50% in some instances.  This sparked a flurry of new action in the TAN ETF where the options rose more than 100% intraday.

Alkermes (ALKS): On 3/24 I noticed unusual action in Alkermes and just 2 days later there was positive news on a drug, Byetta, that ALKS collaborates on, and shares were up nearly 20% from the time I noted the action.

Marten Transports (MRTN): Noted June call activity on 3/16 with shares around $17, and just 10 days later shares are at $20, making the calls worth a lot more.

Varian Semi (VSEA): On 3/17 I noted huge action in the May 17.50 calls and $20 calls when shares were at $19.50, and just 10 days later the calls are in the money after Tier 1 upgrades, and a breakout, with current price at $22.52.

Garmin (GRMN): On 3/18 I noticed unusual buying of calls in Garmin, vertical spreads expecting shares to hold to $20 level when it was trading at $20.50, and 1 week later shares crossed $23.50 as takeover chatter began to make the rounds.

Western Digital (WDC): On 3/18 I noted the heavy call action that continued for days, and shares were trading at $17.50 and have since touched $20 after upgrades at Goldman and further call action sparking rumors.

Sears (SHLD): On 3/19 Sears was trading at $40 and I noted heavy buying of April $45 calls and a possible short squeeze, and just one week later shares were trading above $50.  Shares finished April expiration at $62.81, a huge move from the OTM April $45 calls when they were purchased.

Potash (POT): On 3.20 I noted bullish call buying in big vertical blocks projecting shares to close well above $95 in April with shares trading below $81, and 1 week later rumors of a BHP possible purchase had POT trading near $90.

3-9 to 3-20 2009

Simon Property Group (SPG): Highlighted a massive put butterfly in shares and the next day the company announced an equity offering the priced well below market value, sending shares lower.  Likely more downside coming, however,

Sohu.com (SOHU): On March 11 I highlighted the unusual put action in SOHU and how shares were running into a major resistance area, with bearish bets just a week ahead of expiration.  Shares fell 10% the day before expiration, and the put options were up more than 400%.

Patriot Coal (PCX): Noted unusual call activity in the small coal stock that has been beaten down and shares rose more than 25% from the time of the call, intraday.

Sun Microsystems (JAVA): Another beauty, noted unusual big blocks of calls being bought on March 11, and on March 18 IBM offered to buy the company, sending shares more than 80% higher, and the call options mentioned more than 400% higher.

ResMed (RMD): Just a couple days following my note of bearish put action in the front month, shares received a downgrade at a Tier 1 and fell almost 10%, with the options soaring.

Cree Inc (CREE): After noting the bullish call activity mounting in shares the stock took off more than 20% in a weeks time, rallying much stronger than peers and the market itself.

Ultra Dollar (UUP): An intraday comment on put activity in the Ultra Dollar, which is seen as bullish for the markets ahead of a Fed Meeting.  The Fed came out and purchased long treasury bonds and pumped money into the system causing the S&P to soar higher, and the dollar got crushed.  This unusual action had huge implications across the board.

Ship Finance (SFL): A small company with unusual call activity, which has been showing a lot of promise in the less than $10 names, rose more than 25% in 3 days after my mention.

Newell Rubbermaid (NWL): Just 1 day following the unusual call action in NWL, it was upgraded to Buy and investors piled in taking shares more than 15% higher at a point.

Data Domain (DDUP): After noting put action, shares fell more than 10% on two consecutive trading days, and were then downgraded at Lazard.

Deutsche Bank (DB): Shares surged near $28 but out of the money call buying looking for more gains.  A few days later shares neared $36.

Schering Plough (SGP): Noted unusual call activity the Friday before the announced merger with Merck (MRK) for a 34% premium.

Canadian Natural (CNQ): Noted unusual call action when shares approached a double bottom at $27.50.  Shares rose 5 straight days after to $36, more than a 30% move.

Bank of NY (BK): Noted unusual call action when shares were down 16% on 3/6.  Shares rebounded that day and have risen from $16.50 to $20.50 in 3 trading days, nearly 25% higher.

International Paper (IP) saw very unusual call activity at high rates and shares rose another 17% in 1.5 trading days since.  Follow up: By the end of the week shares were up more than 55% from when my story was posted.

Nokia (NOK): Noted a very bullish call spread as shares hit 5 year lows, and shares rebounded 15% from those lows in just 1.5 days.  The next day shares rose another 7.5% despite the market pulling back a bit.

3-2 to 3-6 2009

Fuel Systems (FSYS): Noted some bets being made against earnings results the night before earnings and shares sold off 32% in the next day of trading.

GMX Resources (GMXR): Noted put buying at very low strikes despite strength in crude, and breakdown in shares.  Over the course of 2 trading days thereafter, shares fell from above $13 to $9.50.

Ann Taylor (ANN): Noted very bearish positioning ahead of sales and earnings, when ANN was at $6.50 on 3/2.  Shares fell 38.5% on 3/6 to $3.41.

Alaska Air (ALK): On 2-27 shares wee above $22 when I mentioned the very bearish put action, and continued to show that airlines were receiving very high put/call interest.  Shares closed at $15 on 3/6.

Barclays (BCS): Noted put buying at the $2.50 strike which signaled a move lower was underway.  Two days later shares sold off more than 30%.

Gatx Corp (GMT): Saw put buying that would require a large move down in shares.  Next day shares fell 11%, with some weakness attributed to General Electric rail cutbacks.

Manulife Financial (MFC): Saw unusual buying of puts at low strikes and shares sold off 10% an hour after my post, and continued 25% lower over the next 3 trading days.

Children’s Place (PLCE): Noted bullish action ahead of same store sales data.  PLCE beat estimates and shares rose more than 18% while the market sold off 5%.

Interdigital (IDCC): Noted weak technicals and bearish activity in puts ahead of earnings, and stock dropped 15% on earnings.

Aecom (ACM): Saw increasingly bearish bets and stock fell next day by 8% after company announced it will be selling common shares to raise capital.

BankRate (RATE): Saw bearish action in puts and stock fell to lows over next few days dropping more than 30%.

ProLogis (PLD): Saw a huge put seller with shares near support and saw this as a bullish bet.  Shares rose 17% the following day and the March $5 calls I bought went from $0.95 to more than $1.70.

2-17 to 2-27 2009

Warnaco (WRC): Despite a sell off in the markets from 2-24 to 2-27, noted bullish call positioning in WRC, and shares rose more than 15% over the 3 days following my Options Radar.

Terex (TEX): Noted bullish call flow off shares making a bottom, and 2 days later shares rose 13.5% as the market fell more than 2%.

NCI Building Systems (NCS): Noted low strike options activity, and shares trade from $7.50 to $5 in the course of 3 days.  Follow up: Shares hit $4.23 a few days later.

Red Robin Gourmet Burger (RRGB): Noted unusual call buying ahead of earnings and shares soared on earnings next day up 17% even as the market was down big.  The call options traded more than 200% higher.

Dominos Pizza (DPZ): Noted unusual put activity ahead of earnings and shares fell more than 25% the following day; put options traded more than 250% higher

Lifepoint (LPNT): Noted unusual options action ahead of earnings on the put side, and shares fell more than 13% over the next 3 days.

Valspar (VAL): In a bear market, saw some bullish prospects in Valspar ahead of earnings, and coinciding with call activity.  Valspar reported strong, and received multiple upgrades, with shares trading as much as 20% higher in the following two days, while the market sold off sharply.

Ensco (ESV): Another pre-earnings call based on options activity, and shares soared 9% on results.

Immucor (BLUD): Noticed heavy put buying that continued the following day as well, and shares fell more than 8% over the next 2 days.

Radioshack (RSH): Noted a strangle ahead of earnings that was bearish skewed and noted my dislike of the company; shares fell 28% on earnings and an additional 10% the following 2 days

Smith and Wesson (SWHC): Noticed a bunch of call buying at the $5 strike when shares were below $3, and also noted a technical breakout.  Shares continued from $3 to more than $4 in the course of 3 days, a 35% move.

Goodrich Petro (GDP): Put activity and a weak technical pattern set up a  perfect trade ahead of earnings.  Shares fell 15% on a horrid earnings announcement.

El Paso (EP): Options activity ahead of earnings signaled a beat, and EP traded nearly 10% higher on the results.

Cigna (CI): Noted unusual put activity in many of the healthcare plan stocks (WLP, CVH, HUM, WCG) just 2 days before a legislation announcement caused the entire group to sell off, some as much as 20%.

Pre-Website

November 21, 2008: OPTIONS RADAR: Unusual call action in Omrix Biopharma (OMRI) where a 2,000 contract position was taken in December $22.50 calls for $0.55.  The spreads are really wide on this thinly traded stock, but Omrix has had takeover rumors recently for a suggested price of $25 with potential bidders being JNJ or Bayer Ag.  In August, the Israel publication Globes reported that a U.S. hedge fund offered $25 per share and that Omrix had rebuffed an offer from distribution partner Johnson & Johnson.  With Omrix currently only trading at $18, and having $4.70 per share cash on the books, with zero debt, the company has all the makings of a takeover target.  Also, JNJ already has distribution rights to two of Omrix’s products, and these relationships often lead to deals.

The trader was aggressive in taking this position, paying near the offer, obviously feeling that a bid could be made for Omrix in the coming month. 

RESULT: Just 3 days later JNJ offered to acquire OMRI for $25 per share, a 39% gain from where shares traded when I broke the story.

December 10, 2008: OPTIONS RADAR: Rohm and Haas (ROH) shares had a sudden spike lower earlier, and I am seeing some unusual options activity, especially with the January $25 puts where 285 contracts traded against OI of 20.  Also, some new action in January $30, and $35 puts.  CDS is about 2 to 3% wider in ROH.    Some may fear the takeover by Dow Chemical could be in jeopardy, with some recent rumors that KPC, a large financer of the deal, could bail due to the global financial crisis.  Dow has continuously stated that the deal will get done, although some feel it may need to restructure it.  Dow will have to start paying a “ticking clause” if the deal is not done by January. 

RESULTS: On 12/29, KPC did in fact pull out of the deal sending ROH shares to lows of $47.23, a major fall from the $71 level that shares traded at when I released the story.

November 12, 2008: OPTIONS RADAR: Tiffany (TIF) shares at a critical support level on a long term chart.  November $17.50 puts are active, with volume of 1042 versus OI of 265.   TIF November option implied volatility is at 101, December is at 107; above its 6-month average of 57.  Tiffany’s can be seen as a possible sympathy play with the poor results from the Sotheby (BID) auction, as a luxury item retailer.  Earnings are on 11/26 BMO, but options expiration is next Friday so traders are betting on a near-term fallout ahead of earnings.  The holiday retail spending is expected to be dismal, especially for the pricey items offered by TIF, which could be the reasoning behind the traders paying near the offer for these puts. 

RESULT: Shares were trading at $20.50, and touched lows of $16.64 on options expiration.

November 13, 2008: OPTIONS RADAR: Boeing (BA) seeing unusual options action in November $35 puts, trading 3063 contracts against OI of 2081.  It looks like more of a put selling strategy with trades hitting the bid, so bullish, ahead of next weeks (11/19) presentation at the Credit Suisse Aerospace Conference (1:45pm).  Shares are extremely cheap at just 6x next year’s earnings and sitting near the $40 support level, while many of the Dreamliner delays appear to be priced in at this point.

RESULT: Shares hit lows of $36.17 on options expiration, so the put selling strategy paid off.

November 14, 2008: OPTIONS RADAR: National Oilwell Varco (NOV) seeing a lot of new December put action.  Here is the breakdown: 2900 December $17.50 puts, 6361 December $20 puts, and 2004 December $35 puts.  My take is that this could be a large butterfly spread with a 1/3/1 ratio, a volatility hedge.  Position is a net debit of $6.90 and is profitable on a close for NOV between $14.50 and $28, with max profit at a close at $20.  With NOV trading at $26, this is a bearish outlook for shares.

RESULTS: National Oilwell Varco closed at $23.47 on December options expiration, making the unbalanced butterfly strategy profitable and shares traded in a tight range.

November 17, 2008: OPTIONS RADAR: Jack in the Box (JBX) November $15 puts have traded 446 contracts versus open interest of 40, ahead of tomorrow’s earnings announcement after the close.  Restaurants have been reporting awful results as consumer spending slows, but JBX is a fast-casual restaurant that should outperform the group.  JBX is one of the cheapest restaurant stocks by most valuation metrics, and is also operating in the upper echelon of efficiency, but traders feel that near-term worries outweigh the long-term story here and expect shares to fall on earnings.  Shares are currently right near 2005 support levels at $14.50, which will prove to be a big level. 

RESULTS: Jack in the Box shares were trading near $15.25 when I broke the story and after earnings were announced, shares hit lows of $11.82 on options expiration, making the $15 puts very profitable.

November 25, 2008: OPTIONS RADAR: Itt Tech (ESI) seeing some bullish positioning with 3,151 December $85 calls trading versus open interest of 1447 with traders taking the offer.  Total call volume of 7263 far exceeds the average volume of 605, and only 1960 puts have traded.  $90 is a major resistance area for ESI, but shares have broke through the 20,50, and 200 day EMA’s today (all of which converged), and MACD is nearing a bullish crossover.  ESI is one of the fastest growers in the education industry, but shares are trading at a premium on a P/S multiple to its peers (3.27 vs average of 2.07).  With 12.62% of the float short and a bullish technical chart, shares may get the added boost to put those $85 strike calls in the money.

RESULTS: On December expiration ESI shares hit highs of $91.08, putting the calls far in the money from November 25 levels when shares traded around $85.

November 25, 2008 OPTIONS RADAR: Ameron (AMN) shares are surging 8% higher today on no specific news, however, December $45 calls have traded 19 contracts against open interest of 2, paying the offer on wide spreads, a very bullish signal.  3073 calls have traded against just 12 puts, and the average call volume for this stock is only 16.  Shares are getting a boost today on all the talk regarding stimulus packages to build infrastructure, as the company sells  various types of building materials to the infrastructure companies.  Shares are also trading well below 5 year historical valuation averages, and the thinly traded name could see a large move once real money begins to flow into shares.

RESULTS: Ameron shares approached the $67 level days before December expiration, a very profitable play.

December 8, 2008: OPTIONS RADAR: Tbs Int’l (TBSI) December $7.50 calls very active, trading 442 contracts against OI of 186, and traders paying the offer.  Total call volume of 1075 is nearly 10x the average volume of 156, and only 146 puts have traded.  With shares at $5.80, this is a very bullish bet, betting on almost 40% move in the next 2 weeks.  Shares of TBSI made a nice rounded bottom earlier this month, and along with many of the Dry-shipping stocks (DRYS, GNK, EGLE) is beginning to exhibit a possible inverse head and shoulders forming, a major reversal signal. 

This group is one of the most beaten down due to the global credit freeze and economic slowdown, as the Baltic Dry Index was a leading indicator for the economic crisis we are currently in, but options activity along with the technical charts is beginning to signal a rebound.  Many of the worries associated with the Dry-shippers is in relation to liquidity concerns, as ships sit around with nothing to ship, but other companies in this peer group have shown the ability to maintain adequate financing.

RESULTS: TBSI shares hit highs of $11.25 the day prior to December expiration, nearly doubling as many of the Dry-shipping stocks rebounded off lows.

December 11, 2008: OPTIONS RADAR: Traders are paying up for calls in Pan American Silver (PAAS), where the volume in the December $15 and $17.50 calls far exceeds open interest.  A total of 5427 calls and 977 puts have traded.  The action is heavily skewed to the bullish side, with 3x the average calls trading, and almost a record volume day.  As metals and commodities continue to be on a tear, Silver (SLV) just broke above its 50 day EMA and out of a downtrend.  If PAAS can get through $14.50, $17.50 would be the next target for shares. 

RESULTS: Pan American shares traded from $14 up to $17.80 in the days following this comment, making the calls very profitable.

December 12, 2008: OPTION RADAR: Transocean (RIG) puts are active, with increased activity in December $45, $50, and $55 puts.  15,000 puts have traded today already, more than the daily average of 13,225.  Shares were cut to market perform earlier today at Friedman, and RIG will be booted from the S$P 500 next week.  The distribution of the action indicates a possible large butterfly spreads the 3 aforementioned strikes, with max profit at a RIG close of $50 next week 

RESULTS: Shares touched $49.60 on options expiration, almost at the maximum profit area.

December 12, 2008: OPTION RADAR: As shares of Polycom (PLCM) break support at $16, an option trade of 1,000 contracts went into the December $15 puts against OI of 42, trader taking the offer.  A record volume of nearly 8000 puts traded for Polycom (750 calls), with only an average of 366 puts trading in a given day.  There looks to be strong support at $14.50 from 2005-2006.  The communications provider is facing increased competition in a weakening demand environment, likely the reasoning behind the bearish action in the options market. 

RESULTS: Shares hit $12.20 the day before expiration, making the $15 puts wildly profitable.

December 18, 2008: OPTIONS RADAR: Looking at the action in Dollar Tree (DLTR) February 2009 puts, I see what looks to be a bearish put ratio 1x2 spread, where a large 2500 contract position in the February $42.50 puts was bought, and 5000 contracts of the February $37.50 puts were sold.  The trader may be a technician betting the June 2007 top is major resistance and shares are ready to put in a ‘double top’.  Dollar Tree has outperformed other retailers as consumers “trade down” for cheaper products, but any sings of an economic recovery could cause investors to re-value shares that now trade 18x earnings, far exceeding its peer group.

RESULTS: Shares fell to $33 in February making this an extremely profitable call. 

September 26, 2008: Option Trader: Fastenal bear vertical put spread gives 3:1 reward to risk

Fastenal (FAST) has been a standout in the markets recently, but recently broke its uptrend and failed on a re-test at the 50 day EMA.  The next support levels are $47.50 (the 200 day EMA), and the prior bottom support at $42.50.  Also, the falling MACD is bearish, and has room to move when looking at prior lows on MACD.

The options strategy would be a vertical put spread for October, selling the $45 puts and buying the $50 puts for a net debit of $1.58.  10 of these spreads would be a $1,580 position with a reward to risk ratio of 3:1.  Max profit would be on a move below $45, with max loss on a move above $50 on expiration.  Breakeven is around $48.50.

Please see the charts below.

RESULTS: FAST closed October near $35, capturing maximum profits on the trade.

10/23 Option Strategist: The Perfect, Yet Simple, Formula for this Imperfect Market

A simple options-trading strategy combined with time-tested cash flow analysis could be the winning formula for generating profits now in individual stocks – all without the worry of perfectly timing a market bottom.

There’s no doubt the markets are turbulent. Every day there is talk on trading floors about how low the market can really go. Traders see the market volatility index (VIX) near all-time highs, huge intraday moves in individual stocks, and enormous uncertainty about the length and depth of a global recession. They worry about slowing earnings growth, contracting margins, and struggling international operations. The broader market is in for a “valuation reality check” as it should be for companies trading at very high multiples to forward earnings while we are heading into what could be a multi-quarter recession

That’s why a cash flow-focused put-selling strategy makes sense. It a way to be like Warren Buffet in being greedy when others are fearful, but to do so in a very focused way.  Buffet himself has been actively selling puts against his position in Burlington Northern Santa Fe (BNI), a double long.  It allows you to target the individual stocks with strong balance sheets that can exit a multi-quarter recession strongly, and to do so with a measure of protection.

Focusing on cash is simply common sense. Cash is most stable asset there is in today’s market. And companies with a strong balance sheet that can consistently generate free cash flow are the ones that don’t have to worry about paying off debt. What’s more, they’re likely the blue-chip names that will rebound first.

THE STRATEGY:

It works like this: Sell out of the money (or near the money) puts on companies with strong balance sheets that are trading at a low price to free cash flow metric with the intention of buying them back at a cheaper price or better yet, having them expire worthless. 

There are several key benefits.

If the market rallies, you are making money as stocks rebound and get further from the strike, while also benefiting from a falling VIX that takes volatility premium out of the contracts, allowing you to buy the puts back (to close) at a big discount. 

If the market continues to fall, you are protected by having positions in the names that have the least amount of downside. And with the VIX trading as if it is exhausted, you can still see some volatility decay that will lower the prices of the puts. 

Also, due to the current call-put skew, the puts value will decline more rapidly than the calls value will rise as the market moves higher.

PUTTING IT IN PRACTICE:

Screening the entire optionable stock universe of tradable names, with Price/Free Cash Flow of less than 5, Long Term Debt/Equity of less than 0.5, positive operating margins, a quick ratio greater than 1, and forecasted positive EPS growth for next year, we are left with 23 companies.

Applying some simple technical analysis to look through these names that have some longer term support levels at current prices the following are the stocks we would be selling puts against:

Benchmark Electronics (BHE): Sell December $10 puts for $1.20

BHP Billiton (BHP): Sell December $30 puts for $4.50

CF Industries (CF): Sell December $30 puts for $2.30

Emcor Group (EME): Sell December $15 puts for $1.45

JDA Software (JDAS): Sell December $12.5 puts for $1.15

Legg Mason (LM): Sell December $15 puts for $2.85

Perini Corp (PCR): Sell December $15 puts for $2.25

Lam Research (LRCX): Sell December $17.5 puts for $1.70

URS Corp (URS): Sell December $20 puts for $2.35

Western Digital (WDC) Sell December $10 puts for $0.60

These look like the best contracts for these companies, although if you are more risk adverse you can sell further out of the money puts for a smaller credit.

RESULTS: Each one of these expired worthless, enabling the trader to capture the full credit.