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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Good Volatility and Bad Volatility, is there such a thing?

One of the cooler things about this job is my occasional stints as a talker on the Option Insider Radio Network (see the link to the right of this blog).  I sit in on the Option Block once a week with Mark Longo, and, occasionally, I do the Vol Views show.  The shows for the most part are all about options and market volatility.  The Vol Views show generally brings in a guest speaker, a trader, a researcher, or industry bigwig, and I get to ask questions and listen to what they have to say. 

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I would not buy GRPN with a Groupon Coupon

Europe is putting big pressure on the US equity market.  In fact, the close to close activity looks  much more benign, I think, than the intraday selling.  After watching the most overvalued security in the world, the TLT, trade to a new high for the year (and it could go higher as the Greek electorate figures out what happens after they get to replace their shiny Euros with TP), I looked at revisiting GRPN just post-earnings.  A few things were bothersome about the activity today. 

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Will FSLR flame out?

Today I am going to call Bizarro Day in the financial markets.  Bond yields were up, stocks soft, gold down, oil down, and Nat Gas was up.  This recipe does not quite add up.  We can chalk it up to no one really understanding what is happening anymore or some giant fund unwinding a position.  Or, maybe, there is some extra angst on the NFP number tomorrow.  Either way, it was a strange day.  Let’s see if the vanilla market activity in FSLR is a good tell.

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