HOT TRADING STRATEGIES FOR A COLD MARKET
Daily Stock Market Equity and Options Trading Commentary

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Thursday, October 1, 2009

Most Active Stock Options October 1, 2009

As of today the first day of October 2009, the top ten most stock option contracts traded were:
  1. United States Oil Fund (NYSE:USO) January 55 Call Options
  2. S&P 500 SPDR (NYSE:SPY) October 105 Put Options
  3. PowerShares QQQ (NASDAQ:QQQQ) October 42 Put Options
  4. PowerShares QQQ October 41 Put Options
  5. S&P 500 SPDR November 100 Put Options
  6. S&P 500 SPDR October 103 Put Options
  7. S&P 500 SPDR October 100 Put Options
  8. S&P 500 SPDR October 104 Put Options
  9. PowerShares QQQ October 40 Put Options
  10. iShares MSCI Emerging Markets Index (NYSE:EEM) November 34 Put Options
A quick glance seems to show that most traders are still bearish for this month and even November. I am a little nervous ahead of the unemployment situation numbers which will be released Friday morning, after seeing the ISM data today. Today I took profits in some of my holdings, and opened several 78/68 vertical put spreads, after closing and taking profits from the 86 strike puts I purchased less than a week ago on the Direxion Daily Financial Bull 3X ETF (NYSE:FAS). From the list above it is very strange that the most active option traded was the January 55 strike USO call option (ETF currently just above 36). It is also worth noting that while the USO was higher by only 4 cents, the January 55 call contract traded higher by a dime (66.7%) to close at the ask of $25 per contract. This struck me as quite unusual. Sphere: Related Content

Tuesday, September 29, 2009

Most Active Stock Options September 29, 2009

As of today Tuesday September 29, 2009 the top ten most active option contracts were:
  1. Citigroup (NYSE:C) October 5 Call Options
  2. American Express (NYSE:AXP) December 25 Call Options
  3. Financial SPDR (NYSE:XLF) December 17 Call Options
  4. Financial SPDR December 19 Call Options
  5. iShares Russell 2000 Index ETF (NYSE:IWM) October 59 Put Options
  6. iShares MSCI Japan Index ETF (NYSE:EWJ) January 8 Put Options
  7. S&P 500 SPDR ETF (NYSE:SPY) October 105 Put Options
  8. CIT Group (NYSE:CIT) October 2.50 Call Options
  9. CIT Group October 2 Call Options
  10. PowerShares QQQ (NASDAQ:QQQQ) October 40 Put Options
American Express will be spinning a dividend of 18 cents out before trade Wednesday which is likely the reason behind very active options. Looking ahead to the December expiration it looks as though one strategist may have been opening vertical call spreads for the XLF 17/19. Options activity picked up on CIT Group as the stock crossed 2 a share Tuesday. I looked at opening vertical call spreads for the October 2/2.50 which could have been bought between $15 - $20 per spread to capture $50 if CIT traded at or above 2.50 a share at expiration. Sphere: Related Content

Monday, September 28, 2009

Most Active Stock Options September 28, 2009

As of today Monday September 28, 2009 the top ten most traded option contracts were:
  1. Annaly Capital Management, Inc. (NYSE:NLY) October 16 Call Options
  2. Annaly Capital Management, Inc. October 15 Call Options
  3. Annaly Capital Management, Inc. January 15 Call Options
  4. Annaly Capital Management, Inc. October 18 Call Options
  5. Annaly Capital Management, Inc. October 17 Call Options
  6. PowerShares QQQ (NASDAQ:QQQQ) October 40 Put Options
  7. CIT Group Inc. (NYSE:CIT) November 1 Put Options
  8. Citigroup Inc. (NYSE:C) October 5 Call Options
  9. General Electric (NYSE:GE) October 16 Put Options
  10. S&P 500 SPDR ETF (NYSE:SPY) October 105 Put Options
It may seem strange that Annaly capital management was trading among the most actives, but they will be spinning a dividend of 69 cents out Tuesday before trade. The other most active options activity seems to be more bearish with the exception of the Citigroup Call options. Sphere: Related Content

Bullish Stocks to Watch: Week of September 28, 2009

Here is a list of 7 stocks which broke out during Friday's trade on big volume. I will be keeping my eye on all of these stocks this week, but chose only one to write a detailed option trade about this week. All of these stocks demonstrated tremendous strength during Friday's trade breaking out to the upside on huge volume. The table below shows the company, ticker, Friday's per share % increase, and Friday's volume increase (% increased compared to 50 day average). For your convenience I have ranked the stocks in order from greatest to least volume % change.

Company Ticker Price Change Volume Change
Luna Innovations Inc LUNA 94.64% 10617.62%
Dataram Corp DRAM 54.47% 9241.51%
Durect Corporation DRRX 15.35% 1193.01%
Terrestar Corp TSTR 10.78% 338.34%
Brunswick Corp BC 15.84% 197.29%
Diedrich Coffee DDRX 3.80% 45.77%
Jefferies Group Inc JEF 3.96% 33.08%

The stock that is most attractive to me from the list above is: Brunswick Corp (BC). This stock was upgraded Friday which caused this sharp increase, so purchasing this stock on weakness is key. If the overall market can hold and continue to move higher, I think this stock easily has a shot at a fresh 52 week high (above 14.10 a share). Below is an option idea based on this type of speculation. To learn more about the option strategies outlined in this post, risks, pricing, calculations, other strategies, and options in general, click here.

Brunswick Diagonal Call Option Spread Trade: I am bullish on BC shorter term, so I will look to be opening diagonal call spreads using the in the money December 10 strike call options as my base, and using higher strike nearer term call options to write out against them. With less than 20 days left until the October expiration, the 12.50 strike call option is bringing a decent premium. Depending on when I decide to write it and the purchase price of the December 10 call option will play a major factor, but using data as of Friday's close, I could open this spread for roughly $170 per spread. If BC traded at or above 12.50 at October expiration this position would yield a 47.1% gain (both contracts being closed as the near dated option delta exceeds the longer dated option delta). If BC is not trading above these levels, I would bank 100% of the premium received for the October option contracts and look to write out the base contracts for a similar strike for the November option expiration. This is a bullish income generating strategy, if BC sells off significantly 100% of the premium paid for the December 10 call options could be lost.

The ideas outlined above involve the use of stock options. The reason option volumes have surged in the last 5 years is because they are a great way to hedge your portfolio as well as create income off of your shares (see option volume chart).

These are just examples and are not recommendations to buy or sell any security; if you're more bullish/bearish, you’ll want to adjust the strike price and expiration accordingly.

Disclosure: No Positions

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