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Showing posts from June, 2013

Markets Soft without Stimulus

Markets around the world pulled back the reigns as central banks look to taper quantitative easing. Japan’s central bank decided to leave their current pace of monetary policy unchecked, which has effectively cut the Nikkei down 1.5% on the day, affecting nearly every market in-between, scaring the DJIA 165 points off the start this morning. US Treasuries have now notched the highest yield in 14 months on the 10 year note.

This morning 55,257 EEM July 35 puts were purchased by a trader for $0.29 each, costing him a large $1,602,453. This is a bearish move on the Emerging Markets ETF, with expectations that by the July expiration, the price of EEM will dip below $34.71. EEM opened today at $39.32 and if this trader was to pass the breakeven point, the ETF would have to drop by more than 11.7% within a little over a month.

EEM opened today 1.9% lower than its closing price yesterday and since the 52-week high the ETF experienced in early January, it has lowered by over 13%. While this …

Monsanto’s stock makes way while sun shines

Monsanto surges nearly 5% after announcing that the seed making conglomerate will effectively extend and increase its stock buyback after its current repurchase campaign finalizes on July 1. This new program will increase to purchase $2 billion worth of company stock over the next three years. This news from the agriculture behemoth comes as Standard & Poor’s raised its credit rating to “stable” from “negative.”

MON earns its keep from three main sources of generating revenue: agricultural chemical sales, designing and selling biotechnology traits, and collecting royalties on the aforementioned traits. When estimating expected returns, Monsanto management analyzes historical returns, economic trends, market conditions and changes in consumer demand.

Corn seeds make up for three quarters of Monsanto’s seed sales; the USDA projected 2013 production to top 2012 by 32%. This is good news for MON; the more seeds, the merrier-- corn seed has been on a 16% tear. Herbicides to cater the s…

Stocks Stumble Only to Stand Back Up

Week in review June 3-7 2013
S&P 0.7%
Dow 0.83%
Russel 2000 0.34%
GLD -0.65%
TLT(Barclays 20 year us treasury index) -0.94%
VIX -7.31%


“Far more money has been lost by investors preparing for corrections or trying to anticipate corrections than has been lost in the corrections themselves” (Peter Lynch) 
June started off ominous as we saw a continuation of the largest selloff the market has seen in 2013.    On Thursday’s low (1598 in the S&P 500) the marked had slumped a total of 5.27% from the year-to-date high (1687), and the CBOE volatility Index VIX had climbed to 18.51. Technical analysts look for the S&P500 to be at a relative low while the VIX is at a high.  This coupled with an increase in volume signals that there is a culmination in the selling.  When the S&P fell below the 50 day moving average of 1606 the selling pressure peaked and when the dust settled, the SPX closed at 1643 for the week.  This rally got wind in its sail from the lukewarm American job report thi…

Yahoo Bears Search for a Correction

There has been recent activity with Yahoo put options today, where a large quantity of June 25 puts were bought for thirty and thirty-five cents. These were done in quantities of 300-500 contracts, giving the traders the right to sell tens of thousands of YHOO shares. This is a bearish bet that Yahoo stock price will drop below $24.65, which these traders expect to happen by expiration on June 13. For this to occur YHOO would need to drop 4.8% over the next 15 days.

Yahoo offers personalized technology services for their clients, connecting users with the exact content they need. In turn, Yahoo sells that information to advertisers and marketers. Yahoo’s CFO Ken Goldman’s opinion expressed confidence in the Sunnyvale, California company. At a recent conference he remarked, “We’re not afraid to make any decisions” when prompted on Yahoo’s taste for acquisitions. Goldman has an eye on the mobile market, and cites the acquisitions “to help basically accelerate our progress … and continue…

US Treasury Sale Stalls GM's Rally

A large trade of over 3200 June 13 calls was sold shortly after the U.S. Treasury Department released a statement that it will sell 30 million share of the Detroit automaker General Motors. The United Auto Workers will also sell an additional 20 million shares of the Motor City staple, slowing any potential rally on the stock with a total of 50 million shares now on the market. 

Since there are suddenly 50 million new and shares hitting the market, they are expecting the stock to perhaps stay stagnant or slightly increase but certainly not exceed the strike of $36. They will collect the premium from selling the call if the stock stays below $36, , but for that buffer, the seller loses the right to capture any market rally above $36.

Today the Treasury Department gave notice that it will empty its 300 million dollar position in the company by early next year. This has resulted in the slight slump GM is experiencing today (-1.5%). This is because since the treasury has committed to sellin…

Morning Update

AIG got an off the bell spike to $45.47 on the open after a favorable index move, and is currently trading a tick down at $44.40. Today around 4,500 options were purchased on AIG June 40 and 45 calls, reflecting a bullish position in the stock.

American International Group and General Motors will rejoin the S&P 500 after the closing bell Thursday. This is a step in the right direction for AIG, which was removed from the index after taking a $152 Billion taxpayer-funded infusion from the government since the financial crisis in 2008 due to its issuance of credit-default swaps without adequate reserves for. This represents the most the government has ever invested on taxpayers’ behalf. The company has since repaid the government for its loan, and at least in the time being, things are good. Many portfolio managers and funds closely follow the S&P companies, and in order to do so must keep a portfolio relative to the companies and weight in each index. Since AIG is being int…