An AAPL Anomaly Just in Time for Earnings

Wel,l we had a snoozer of a day just when the market thought it could catch a bid.  The only thing that really got sold was the VIX.  It pitched over the cliff to trade 15.71 by the end of the day.  The seesaw around NFP on Friday begins.  Since Bernanke can’t do a QE4 less than a month after QE3, the market seems to be reassessing the kind of move we can make.  A decent report will give things a boost no doubt.

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Something Tasty for AAPL

No talk about the VIX today.  Option Pit covered the movements in the blog the last two days, so it is probably time to move on to the other VIX-like products.  Other VIX-like products you say?  Well, AAPL is so big that it has its own VIX, so let’s take a look at it.

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AZO on a Tear, Start your Engines!

Well, if you are Eddie Lampert, I guess this makes up for Sears.  Since he is a smart guy, he will probably end up doing pretty well on both (if not already).  But this is about AutoZone and the blowout the stock had today.  The question is, if there is something to do, and if you are not, well, Eddie Lampert andget to see this as an opportunity to ride the momentum up.

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Paying the Price for PCLN

'It Can't Move That Much"

Famous last words from many of my option mentoring students, when they are dabbling in selling premium into earnings.  Well, those option traders are typically given a tough education about options in short order.  We saw this happen in tall order in PCLN options.  Take a look at the closing price of the weekly straddle:


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GOOG Earnings Over Reaction

Google taught my options mentoring students a nice lesson on getting long premium into earnings; it usually pays to play the day before earnings, not the day of.  Because the ATM straddle that was purchased on Wednesday was a huge winner, while the ATM straddle purchased yesterday was a loser.  Thankfully, most students actually had on the long calendar we looked at during the pit report, so they all came out ahead.

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The Anatomy of a (not good) Trade

 With the earnings season coming into full swing and going a bit better than most expected, I thought it would be a good time to dissect a trade we did at Option Pit that did not work out quite as we thought it would. Usually, when I lose money on a trade, I like to go back and see if there is anything I missed.  For the example below, it was relatively simple, but it is a good exercise to figure out what went wrong.   

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JCP juice at a discount?

It did not take much for the market to sell off today.  Between the CMI reduced guidance and the account seizures at PFG Best, the whole market got shaken pretty good.  The first half of the year with the Europeans dithering around has got some companies spooked, and it might start to show a little.  The VIX futures rallied a little (up less 5% on a .8% move in the SPX), but no real fear crept back into the market.  A news-driven, illiquid market (that is what we have) does push the volatility around in select name,s as it did with JCP today.

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Trade from Bloomberg: This BUD’s for you!

The animal spirits seem to be back in a small way across the equity markets today.  As I write this today there is a nice dispersion of stocks moving up and down and that is a welcome relief from the crazy correlations the market has been experiencing of late.  Coming off of the 4th of July it also makes me think of a nice frosty beverage.  BUD is looking like a tasty treat.  How so?


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Options Education: JBL Long Calendar as Seen on Bloomberg TV

Today, on Bloomberg TV's 3 vs Trish our COO and lead option educator Mark Sebastian discussed an earnings play on Jabil Circut.  The trade market discussed was a long calendar spread for .30:


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VXAPL, the AAPL IV Index near Jan Lows

One of the things we encourage our option mentoring students to dig into is the study of volatility.  We want all of our traders educated on reading volatility.  One nice way to trade IV's is the CBOE Equity VIX indexes; the one we are watching today is VXAPL.

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