Option Investor
Newsletter

Daily Newsletter, Thursday, 1/12/2017

Table of Contents

  1. Market Wrap
  2. New Option Plays
  3. In Play Updates and Reviews

Market Wrap

Trump Slump

by Thomas Hughes

Click here to email Thomas Hughes

Introduction

Indices fell in the wake of Trump's 1st press conference post-election. Whether or not this is the onset of a deeper correction or just another of news driven volatility is yet to be seen. We've still a number of major catalysts at hand including earnings season, the ECB, the inauguration and the FOMC so I'm leaning toward the idea today's action is day to day news driven volatility and not the start of correction, at least not yet. The specific reason for today's slump, a lack of fiscal clarity in yesterday's press conference, could be easily rectified by Tweet at any time and likely clarified as early as minutes post-inauguration.

International markets sold off on the Trump press conference too. Asian indices were led lower by the Nikkei which lost nearly -1.25%, a stronger yen, another result of yesterday's presser, adding downward pressure to Japanese equities. European markets started the day in negative territory if barely, and then fell further on cues from our own. The DAX was one of the days biggest losers, closing with a loss slightly greater than -1% after hovering near break even for most of the early part of the day.

Market Statistics

Futures trading was relatively flat all morning, if in the red. The indices were indicated to open with losses in the range of -0.25% and that held into the open of trading. There was a little bit of data, jobless claims and import/export prices, but neither piece was enough to move the market. The open was a little hectic, the indices opened with losses as indicated and then proceeded to sell-off into the morning. The SPX hit it's low just after 11AM, slightly more than -21 points below yesterday's close and at the support of a long term up trend line, confirmed by the short term 30 day moving average, where it began a bounce that had, by the close, recovered nearly all of the day's losses.

Economic Calendar

The Economy

Initial jobless claims rose a less than expected 10,000, in addition to an upward revision of 2,000, to hit 247,000 in this week's data. The 4 week moving average of claims fell -1,750 to hit 256,000. This is the 97th week of claims below 300K, the longest streak since 1970. On a not adjusted basis claims rose by 16.9% versus an expected 12.2% but the numbers continue to diverge from last years data. YOY not adjusted claims are now -18.4% below last years levels and present a couple of possibilities. The first is that this year's data isn't tracking exactly in line in a day to day year over year comparisons and will soon catch up with last years spike in claims. The second is that the labor market has made a substantial improvement over last year, at least in terms of post-holiday labor force reductions.


Continuing claims fell -29,000 to hit 2.087 million, last week's figures were revised higher by 4,000, and the four week moving average of claims rose by 1,650. The recent rise in continuing claims has begun to subside but remains near 3 month highs. Despite this rise claims remain low relative to the long term trends and consistent with labor market health.

The total number of Americans claiming unemployment has begun to spike, as expected. This week's data, for the period ending 12/24, saw claims rise by 140,578 to hit 2.294 and a 10 month high. This spike in claims needs to be monitored but so far is as expected, in line with seasonal and long term trends. Based on the historical data we can expect to see claims spike again next week, possibly as high as 2.75 million, and then begin to subside going into the spring. If the data skews from expectation it'll be time to take a deeper look to see what may be happening. In related news Amazon and Taco Bell each announced today the intent to create 100,000 new jobs in the coming years.


Import/Export Prices data was released at 8:30AM, both rising on a month to month and year over year basis. Import prices are up 0.4% the November to December period and 1.8% year over year. Export prices are up 0.3% month to month and 1.1% year over year. Rising fuel prices drove the gains in import prices, non-agricultural goods the rise in export prices.


The Dollar Index

The dollar fell today on an absence of news pertaining to Trump's plan for the economy. The Dollar Index shed a little more than -1% intraday, falling below the short term moving average and the near term trading range to approach support targets near $100.50. The index was able to bounce back from the lows, confirming support at the previous long term high, but may test those lows again in the near term. Near term action is driven by a lack of news and a cooling of expectations, this leaves the index ripe for rally in the event of positive data, Trumponomic developments, ECB action, BOJ action or FOMC action. Tomorrow we'll get PPI data as well as retail sales and a couple of regional reports, next week it's the ECB, more data and the inauguration, the week after is clear and then the FOMC. Long term outlook remain dollar strong.


The Gold Index

Gold prices remain elevated on weaker dollar values. Today spot prices moved up to another new short term high, testing resistance at $1,200. The metal was able to move above $1,200 intraday but was capped at that level, closing with a loss of -0.10% at $1,195. $1,200 is likely resistance. This resistance is likely to hold while the dollar remains above support, a break above this level would be bullish in the near term with upside target near $1,235. In the near term uncertainty of FOMC intent and Trumponomics has softened the dollar and strengthened gold, short to long term remains skewed toward dollar strength and weaker gold as the economy strengthens and the FOMC raises rates. Tomorrow's PPI is an opportunity for sentiment to be reinforced, for good or bad.

The gold miners tried to move higher but hit resistance, just like the underlying metal. Today's action create a small to medium sized black candle that may be indicative of near term reversal. The bearish argument is that the candle looks like the 2nd of 2 tops in a near term double top pattern that would be trend following, and supported by gold outlook. The caveat is that the market could continue to lose faith in the FOMC or Trumponomics and cause a further decline in the dollar and rise in gold. The indicators are consistent with a peak within a downtrend, stochastic for one confirming resistance with a bearish crossover at the upper signal line, while %D is confirming resistance at the upper signal line. Near term support is just below today's close at the 50% retracement level and the short term moving average, a break below here is bearish and trend following with downside targets near $19.75 and $18.50.


The Oil Index

Oil prices rallied for a second day, extending a bounce from the bottom of a near term trading range, and gained more than 1.6%. WTI closed with a gain of $0.84 to trade above $53 for the first time in a week. The bounce is driven on rising demand in China and further signs the Saudis and OPEC are serious about production cuts. China's state run oil company says that demand will grow in 2017 to hit a record high with net imports rising more than 5.25%. On the OPEC front the Saudi's have announced further cuts, to be enacted in February, in compliance with the OPEC deal. Others have also shown signs of compliance but this is tempered by rising production in the US.

The Oil Index did not rise, falling instead to post a loss near -0.5%. The loss is not major, merely sideways drift within the 1 month trading range, and above support. Support is at the bottom of the range, near 1,260, and confirmed by the short term moving average. The indicators are consistent with range bound trading and leave open the possibility for another test of support. A break below the short term moving average is not necessarily bearish, additional support may be found along at 1,235 and the 50% retracement line. The short and long term outlook for this sector remains bullish.


In The News, Story Stocks and Earnings

Delta Airlines reported earnings before the bell and beat expectations. Earnings and revenue fell from the year ago period, primarily due to the new pilot agreement, but both came in better than expectations. Along with this the company provided upbeat outlook that helped to lift the stock in pre-opening trading. The stock opened flat however and had a volatile day as profit taking set in. The indicators are set up in a strong buy signal, a break above resistance would be bullish for the near to short term.


Earnings season gets a kick in the pants tomorrow morning when 3 of the nations largest banks report earnings; JP Morgan, Wells Fargo and Bank of America. Their reports will set the tone for the entire season and could spark a big move. In terms of expectations, this is their chance to come in better than expected and possibly raise full year outlook in response to the elevated rate-hike environment we now find ourselves in. If they fail to meet expectations, or give only tepid outlook, we could see them lead the market lower. The Financial Sector SPDR XLF shed more than -1% intraday but was able to recover most of those losses before the close. Today's action was light, another day in a month of sideways trading within a tight consolidation band as the market gears up for earnings, the indicators are incredibly neutral and could go either way. A break below $23.25 is bearish, a break above $23.75 is bullish, either could result in a move of $3 to $4 in the near to short term.


The VIX moved higher in early trading, tested the short term moving average, and then retreat to close with a loss. The fear index is trending sideways at long term lows, indicative of an unencumbered market and a high potential for rally. The indicators have rolled over into a sell signal, consistent with a long term reduction in volatility, and suggestive of an extension of the current rally. The index is at/near long term historical lows so I'm not sure it can go lower, trending near these levels is good enough.


The Indices

The bears tried to take control but it was not much of an effort. The move did nothing more than take the indices down to near term support levels and provide entry for the bulls. Today's leader was the Dow Jones Transportation Average with a loss of -0.46% and may also be the most bullish looking of the charts today. The index tested support at the short term moving average, just below the recently broken previous all time high, with indicators rolling into a strong trend following entry. Stochastic has already fired the trend following bullish crossover and confirmed with the strong signal, MACD is close behind. Resistance is at the previous all time high and current all time high and look like they will be tested at least, a break above is bullish in the near to short term.


The Dow Jones Industrial Average is runner up in terms of loss having shed -0.32% in today's session. The index created a small bodied candle with long upper and lower shadows forming a spinning top of more substantial size. The index is trending sideways within a range and while not overly bearish, does not look overly bullish either. The indicators are listless and consistent with range bound trading and have not formed the kind of signal as seen on the DJT chart. Near term support is the short term moving average near 19,675, resistance is 20,000. A break past either will have near term implications at least with possible moves in the range of 500 to 1000 points.


The NASDAQ Composite fell -0.29% but created a near perfect hammer doji, opening and closing at almost the exact same price. This doji confirms near term support at 5,500, further confirmed by the indicators. Both indicators have confirmed support with trend following bullish crossover that could lead the index higher into the short term. Near term resistance is the new all time high, set yesterday, with upside targets near 5,750.


The S&P 500 posted the smallest loss in today's session, only -0.21%. The broad market created a small doji candle testing support along a long term up trend line. Support is at 2,250, confirmed by the short term moving average and the indicators, a break below which would be bearish. The indicators are consistent with a trend following entry, stochastic has already fired the early signal, is in process of confirming with a stronger signal with MACD following close behind. Upside target is 2,300 in the near term and 2,500 in the short to long.


I am very encouraged by how things are developing. The charts are setting up nicely, earnings and economic outlook are both positive and expansionary, the only thing keeping me from getting really excited and going full-bull is the fact that there are still a few hurdles ahead. Those include earnings, the inauguration and the FOMC and of those, earnings and the inauguration are the more important and the earnings question could be answered tomorrow. Once past those hurdles I see the long term secular bull market continuing on to new highs. I'm bullish but still a bit cautious, waiting to see what the next week will bring.

Until then, remember the trend!

Thomas Hughes

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New Option Plays

Dip Buying

by Jim Brown

Click here to email Jim Brown

Editors Note:

The dips are increasing but dip buyers are alive and well. I propose we buy a potential dip between now and the inauguration.


NEW DIRECTIONAL CALL PLAYS

SPY - S&P-500 ETF - ETF Profile

The SPDR S&P 500 ETF Trust seeks to provide investment results that, before expenses, correspond generally to the price and yield performance of the S&P 500 Index.

The SPY dipped to $225 intraday before the dip buyers rushed into the market. Initial support is $223 and I believe we have a chance to test that level before the inauguration. There are only four trading days left. If the bank earnings disappoint on Friday we could see a decline in low volume. With the three-day weekend ahead we could see traders move to the sidelines to avoid weekend event risk while the U.S. markets are closed.

We could also see a pre inauguration decline as traders worry about event risk surrounding the event.

Whatever the reason we could see the ETF test that level over the next four days. Assuming there is no disaster surrounding the inauguration, we could see a real rally begin afterwards.

This is a short term position using February options just in case any potential dip turns into a crash. The estimated option premium should be less than $2.

With a SPY trade at $223.25

Buy Feb $225 call, estimated to be $2.00 or less, no initial stop loss.


NEW DIRECTIONAL PUT PLAYS

No New Bearish Plays



In Play Updates and Reviews

Dip Buyer Day

by Jim Brown

Click here to email Jim Brown

Editors Note:

The -181 point dip on the Dow was bought on decent volume to end with only a -63 point loss. This was another great opportunity for sellers to overpower the markets and cause a real market meltdown and it did not happen. The last two days saw big declines and both were bought. Despite ending with a loss on the major indexes this was still a bullish day.

As long as the sellers take their best shot and end up with only a minor decline, we will eventually see the trend reverse and the buyers will win the day with a breakout. We have seen 7 Dow components downgraded this week. GS, PG, KO, BA, XOM, T and DIS and the index is still rebounding.

However, we did see resistance levels decline once again. The rebound came to a dead stop at 19,900 and that is 50 points lower than yesterday.

Volume on Friday should be light and the market will be driven by the big bank earnings before the open. Expectations are high so there could be a disappointment.



Current Portfolio


Stop Loss Updates

Check the graphic below for any new stop losses in bright yellow. We need to always be prepared for an unexpected decline.


Profit Targets

Check the graphic below for any profit stops in green. We need to always be prepared for a profit exit at resistance.




Current Position Changes


DRI - Darden Restaurants

Long put position was stopped at $73.35.

FDX - FedEx

Long call recommendation has been cancelled.



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Long and short equity trades = Premier Investor



BULLISH Play Updates

FDX - FedEx - Company Profile

Comments:

I surrender. No specific news today but FDX declined $2 despite the good news yesterday. I am cancelling the recommendation.

Original Trade Description: Jan 7th

FedEx Corporation provides transportation, e-commerce, and business services in the United States and internationally. The company's FedEx Express segment provides various shipping services for the delivery of packages and freight; international trade services specializing in customs brokerage, and ocean and air freight forwarding services; assistance with the customs-trade partnership against terrorism program; and customs clearance services, as well as an information tool that allows customers to track and manage imports. This segment also publishes customs duty and tax information; and offers critical inventory logistics, transportation management, and temperature-controlled transportation services, as well as international express transportation, small-package ground delivery, and freight transportation services. Its FedEx Ground segment provides business and residential money-back guaranteed ground package delivery services; and consolidates and delivers low-weight and less time-sensitive business-to-consumer packages, as well as offers third-party logistics services. The company's FedEx Freight segment offers less-than-truckload freight, and freight-shipping services. As of May 31, 2016, this segment operated approximately 65,000 vehicles and trailers from a network of approximately 370 service centers. Its FedEx Services segment provides sale, marketing, information technology, communication, customer, technical support, billing and collection, and other back-office support services; FedEx Mobile, a suite of solutions to track packages, create shipping labels, view account-specific rate quotes, and access drop-off location information; access to copying and digital printing through retail and Web-based platforms, signs and graphics, professional finishing, computer rentals, and ground shipping and time-definite express shipping services; and packing services, supplies, and boxes. Company description from FinViz.com.

On December 21st, FDX reported earnings of $2.80 that missed estimates for $2.91. Revenue rose 20% to $14.93 billion and beat estimates for $14.91 billion. The problem with the earnings was a large amount of spending to build new distribution hubs and improve others ahead of the holiday season.

FedEx said they were in the midst of a record-breaking holiday shipping season and package volume was expected to rise 10% or more over 2015. They raised full year guidance from $10.85-$11.35 to $10.95-$11.45. The CEO said the recent improvements would allow them to ship more packages at a lower cost with improved delivery.

During the holiday shopping season my family spends a lot of money on Amazon for gifts for our extended family. Because I am a Prime member, others in the family use my account to make purchases and everything comes to my house. In the 2015 season, UPS delivered to my house almost every single day from Amazon. I might get a box from USPS once a week and FedEx maybe once a week.

This year UPS only came twice between Thanksgiving and Christmas. Fedex came 3-4 days a week and USPS 3-4 days a week. That suggests FedEx gained a significant amount of market share from Amazon and moved a lot more packages than UPS. Hopefully this added to their profits on the improved shipping network.

Cowen just reiterated an outperform and raised the price target from $180 to $240.

Earnings are March 21st.

Update 1/11/17: Walgreens (WBA) and FedEx announced a long-term alliance where Walgreens will serve as a pickup and drop off location at thousands of Walgreens all across the country. This is a very positive development for FedEx. Customers can have their e-commerce packages shipped to their local Walgreens where they know the package will not be stolen off their front porch and where staff will be available to sign for the packages. Customers can drop off pre-packaged and pre-labeled shipments and not have to worry about finding a FedEx store that could be miles away from their neighborhood.

Because their earnings are expected to be good, the March option prices are out of sight at $7.50 for a $195 call with FDX at $190. We have to use the February options to get a reasonable price. Given the potential for market volatility between now and expiration, we do not want to spend a lot of money on premium.

I am putting an entry trigger on the position just in case the market decides to turn negative on Monday.

Recommendation cancelled.


PVH - PVH Corp - Company Profile

Comments:

PVH signed PGE winner Scott Piercy and PGA champion David Lingmerth to become IZOD golf ambassadors in a multiyear pact. Shares posted a decent gain in a negative market.

Original Trade Description: Jan 9th

PVH Corp. operates as an apparel company in the United States and internationally. The company operates through six segments: Calvin Klein North America, Calvin Klein International, Tommy Hilfiger North America, Tommy Hilfiger International, Heritage Brands Wholesale, and Heritage Brands Retail. It designs, markets, and retails men's and women's apparel and accessories, branded dress shirts, neckwear, sportswear, jeans wear, intimate apparel, swim products, handbags, footwear, golf apparel, fragrances, cosmetics, eyewear, hosiery, socks, jewelry, watches, outerwear, small leather goods, and home furnishings, as well as other related products. The company offers its products under its own brands, such as Calvin Klein, Tommy Hilfiger, Van Heusen, IZOD, ARROW, Warner's, Olga, and Eagle; and licensed brands comprising Speedo, Geoffrey Beene, Kenneth Cole New York, Kenneth Cole Reaction, Sean John, MICHAEL Michael Kors, Michael Kors Collection, and Chaps, as well as various other licensed and private label brands. Company description from FinViz.com.

In November, PVH guided lower for the full year because of a $1.65 per share negative impact from foreign currency exchange issues and some other problems. Shares fell from $119 to $90 where they spent most of December.

They guided for Q4 earnings in a range of $1.13 to $1.18 after a 23-cent impact for currency issues. On January 5th, the company updated guidance saying, "earnings would be at least at the top end of its guidance ranges for both Q4 and full year." That suggests a positive holiday shopping season. As of late last week 11 retail companies had reported sales for holiday shopping and 8 of them reported declines. It was a rough quarter and PVH raised guidance.

Earnings are March 1st.

I am playing PVH for multiple reasons, one of which is that they already lost $30 in the December guidance crash. The $90 support level has held and once a positive market returns, they should be favored by longer-term investors. Since they have already seen a steep decline, a market drop over the next couple weeks should not impact them materially.

I am reaching out to the March expirations so there will be some earnings expectations built into the premium when we exit before they report. If you want to use the February cycle the premiums are about $1 cheaper.

Position 1/10/17:

Long Mar $95 call @ $3.90, see portfolio graphic or stop loss.



BEARISH Play Updates (Alpha by Symbol)

DIA Dow ETF - ETF Profile

Comments:

The Dow collapsed at the open on downgrades to Boeing and Disney but recovered back over support. This was the second major rebound in two days. Other Dow components downgraded this week include GS, T, PG, XOM and KO but the index keeps rebounding.

Original Trade Description: December 7th

The SPDR Dow Jones® Industrial Average ETF Trust seeks to provide investment results that, before expenses, correspond generally to the price and yield performance of the Dow Jones Industrial Average.

Remember Dow 10,000? Traders talked about it for weeks. When it was finally hit, they were passing out Dow 10,000 hats on the floor of the NYSE for a week. That was December 11th 2003. It was a big milestone for the market.

Now 13 years later, we are about to double that with Dow 20,000. Given the place on the calendar, the massive post election rally and the potential for normal profit taking in January, the Dow 20,000 touch could be a massive sell on the news event.

However, we are only 386 points way and it could happen as soon as next week. The Fed rate announcement on Wednesday could either cripple that potential or accelerate it if the Fed maintains a dovish posture on future rate hikes. I believe we will hit Dow 20K before the end of December. When that happens I want to be short the DIA ETF and plan on holding it through January.

I am choosing the Dow because it is the most overbought and could produce the biggest percentage move. Just look at Goldman's chart and the profit that needs to be removed there.

Because there will be plenty of other traders thinking along the same lines I want to enter the put position at 19,900 or $199 on the DIA ETF. I know I am jumping in front of a speeding train to enter a short position on a runaway market but the potential is very high for a good trade.

Position 12/12/16:

12/12 - 1/2 position: Long Feb $195 put @ $3.40, no initial stop loss.

12/13 - 1/2 position: Long Feb $195 put @ $3.15, no initial stop loss.


DRI - Darden Restaurants - Company Profile

Comments:

No specific news. Darden posted another big gain to stop us out at the open. Starting to look like a call play now.

Original Trade Description: December 20th

Darden Restaurants, Inc., through its subsidiaries, owns and operates full-service restaurants in the United States and Canada. As of May 29, 2016, it owned and operated 1,536 restaurants, which included 843 Olive Garden, 481 LongHorn Steakhouse, 54 The Capital Grille, 65 Yard House, 40 Seasons 52, 37 Bahama Breeze, and 16 Eddie V's restaurants. Company description from FinViz.com.

Darden Restaurants (DRI) reported earnings on Tuesday of 64 cents that beat estimates by a penny. Revenue of $1.64 billion missed estimates for $1.65 billion. They guided for the full year 2017 to earnings of $3.87-$3.97 per share. Same store sales growth was choppy. Olive Garden saw +2.6%, Longhorn Steakhouse +0.1%, Capital Grille+1.2%, Eddie V's +2.7%, Yard House +0.7%, Seasons 52 -0.3% and Bahama Breeze +2.6%. Shares spiked $2 on the news but faded in the afternoon to close negative. Darden had rallied 23% since the election.

The idea behind the rally was the end of the push for a $15 per hour minimum wage. When Clinton lost, that effort turned into wishful thinking because republicans have held the view that a lower wage offers entry level workers an opportunity and they can move up in the organization if they are qualified and work hard. Was that worth a 23% rally in Darden shares? I find it hard to believe.

Now that Darden earnings are over, we should expect a couple weeks of post earnigns depression and given the recent rally and the chance for a market decline in early January, the Darden drop could be significant.

Position 12/21/16:

Closed 1/12/17: Long Feb $72.50 put @ $1.55, exit $1.61, +.06 gain.


FINL - Finish Line - Company Profile

Comments:

FINL declared an 11-cent dividend payable March 13th to holders on February 24th. Shares declined 21 cents.

Original Trade Description: January 11th.

The Finish Line, Inc., together with its subsidiaries, operates as a specialty retailer of athletic shoes, apparel, and accessories in the United States. It operates in two divisions, the Finish Line and JackRabbit. The company's Finish Line division engages in the in-store and online retail of athletic shoes for Macy's Retail Holdings, Inc.; Macy's Puerto Rico, Inc.; and Macys.com, Inc., as well as online at macys.com. This division offers men's, women's, and kids' athletic shoes, as well as an assortment of accessories of Nike, Skechers, Converse, Puma, New Balance, Adidas, and other brands. As of April 2, 2016, the company operated Finish Line shops in 392 Macy's department stores in 37 states in the United States, the District of Columbia, and Puerto Rico. Its JackRabbit division retails lifestyle products, such as running shoes, apparel, and accessories of Brooks, Asics, Nike, Saucony, New Balance, and other brands. It also operates the e-commerce sites jackrabbit.com and boulderrunningcompany.com. The company operated 72 JackRabbit stores in 17 states in the United States and the District of Columbia. Company description from FinViz.com.

In late December Finish Line reported a loss of 24 cents compared to estimates for a loss of 18 cents. Revenue was $371.7 million, down -2.7% from the year ago period. Analysts were expecting $412.4 million. They guided for Q4 earnings of 68-73 cents compared to analyst expectations for 96 cents. Shares fell from $23 to $19 on the news and have continued to decline.

Finish Line does not report earnings again until March 22nd. That means every other retailer will post their disappointing quarters and with each earnings miss the weight should increase on FINL shares.

Finish Line operates mall stores and stores inside Macy's stores. Macy's already reported declining traffic and missed on same store sales. This should also impact FINL since lower Macy's traffic means lower traffic in the shoe section.

Shares are currently $17.50 and could easily break below the June lows before the next earnings reports. I am reaching out to May so there will be some earnings expectation in the premium when we exit before the earnings. We can buy time but we do not have to use it.

Position 1/12/17:

Long May $17 put @ $1.55, see portfolio graphic for stop loss.


GATX - GATX Corporation - Company Profile

Comments:

GATX was downgraded from hold to sell by Stifel Nicholas with a $49 price target. Shares fell $2,32 and closed at $57.

Original Trade Description: December 15th

GATX Corporation leases, operates, manages, and remarkets assets in the rail and marine markets in North America and internationally. The company operates in four segments: Rail North America, Rail International, American Steamship Company (ASC), and Portfolio Management. The Rail North America segment primarily leases railcars and locomotive, as well as other ancillary services. This segment also offers repair, maintenance, modification, and regulatory compliance services on the railcar fleet. The Rail International segment leases railcars, as well as offers repair, regulatory compliance, and modernization work for railcars. The ASC segment operates a fleet of vessels that provide waterborne transportation of dry bulk commodities, such as iron ore, coal, limestone aggregates, and metallurgical limestone for steel makers, automobile manufacturing, electricity generation, and non-residential construction markets. The Portfolio Management segment is involved in leasing, asset remarketing, and marine operations, as well as manages portfolios of assets for third parties. As of December 31, 2015, it operated a fleet of 17 vessels; a fleet of approximately 106,100 cars; a fleet of 18,400 boxcars; and a fleet of 611 older four-axle and 26 six-axle locomotives. Company description from FinViz.com.

There has been no news since the company announced a 40-cent dividend on Oct 28th. The dividend is payable on Dec 31st to holders on Dec 15th. That is today. That means nobody else is going to be buying the shares to get the dividend.

Earnings Jan 19th.

GATX has rallied 69% since the election. I can only assume it was because of the rally in the Dow Transports in anticipation of a better economy in 2017. There is no current fundamental reason for a 69% rally and odds are good once the stock begins to roll over with the market it could fall very hard. Apparently other investors believe the same way since the only put strike with any volume is the January 60 puts. There is more volume in that one strike than all the other strikes combined.

Position 12/16/15:

Long Jan $60 put @ $2.35, see portfolio graphic for stop loss.




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