China is rebounding overnight and the S&P futures are up sharply. We are closing some long puts.
Saner heads have finally arrived and the market is set to rebound at the open on Friday, assuming nothing changes overnight. The S&P futures are up +17 with the Shanghai Composite up +3%. The anticipated Chinese insider-selling event failed to appear.
The long puts on SWKS and CME have appreciated into positive status. I am recommending we close both.
Send Jim an email
Items shaded in blue were previously closed.
Current Position Changes
Stop Loss Updates
Check the graphic above for any new stop losses in bright yellow. We need to always be prepared for an unexpected decline.
SWKS - Skyworks Solutions (Close long put)
Skyworks has declined to $67 and as have a January $65 long put. While Skyworks could continue lower if Apple continues to fall there is a better chance that short covering will cause a spike. With only a week left until expiration I believe we should take the money and run.
Close Jan $65 long put, entry .33, currently $1.50, +1.12 gain.
CME - Chicago Mercantile (Close Long Put)
The CME has declined to support at $87.50 and is not likely to decline further in a positive market. I am recommending we close the long put.
Close Jan $85 long put, entry .49, currently .55, +.06 gain
Original Play Recommendations (Alpha by Symbol)
CME - Chicago Mercantile Exchange (Put Spread)
Chicago Mercantile is the U.S. futures exchange and they are doing a thriving business with the directional moves in the commodity sector. With today's close at $98.25 they are within $2 of a new closing high.
Earnings Feb 4th.
Sell Jan $92.50 put, currently $1.45, stop loss $95.25
Buy long Jan $85 put, currently .55, no stop loss
Net credit 90 cents.
FIT - FitBit (Put Spread)
Fitbit has been almost impervious to the market weakness until today. The stock benefitted from two positive articles in Barrons last week and rallied to a four week high. Today's dip inflated the put premiums. I am recommending the Jan $26 short put and that would be a new historic low if the stock actually declined to that level. We saw good support just above that level in late November.
Earnings Jan 28th.
Sell short Jan $26 put, currently $1.10, stop loss $27.75
Buy long Jan $22 put, currently .60, no stop loss.
Net credit 50 cents.
IWM - Russell 2000 ETF (Put Spread)
The next two weeks are typically the best two weeks of the year for the small cap stocks. However, you could not tell it from the decline today. The Russell fell -8 points while the other major indexes posted gains. However, there is decent support at 1,100 and I do believe a late year rally will appear. It may not be as strong as normal but we should see some gains.
I am picking strikes 115 points below the current index level at 1,115. I can't conceive of another 115 point drop in the next two weeks but this is the stock market and anything is possible but still not probable.
Sell short Jan $100 put, currently .53, stop loss $105.75
Buy long Jan $95 put, currently .27, no stop loss
Net credit 26 cents
QQQ - Nasdaq 100 ETF (Put Spread)
The Nasdaq 100 has sold off less than the other major indexes relative to its Aug/Sep lows. Large cap tech stocks are likely to be favored as window dressing for the end of December portfolio markup. With the QQQ declining only -4 points over the last week I seriously doubt it will drop another 10 to our short strike over the next several weeks. If it did that would be a major market meltdown.
Sell short Jan $100 put, currently .47, stop loss $105.75
Buy long Jan $94 put, currently .21, no stop loss
Net credit 26 cents.
SMH - Semiconductor ETF (Put Spread)
Semiconductors are in an uptrend and tech stocks normally do well over the next three weeks. I am recommending a $52 put that is under the November lows. The low in December was $53.37.
Sell short Jan $52 put, currently .55, stop loss $53.35
Buy long Jan $46 put, currently .20, no stop.
Net credit 35 cents.
SPY - S&P-500 ETF (Put Spread)
The S&P has rallied +80 points since the 1993 low on Monday. With the next two weeks normally bullish or at least not bearish I am adding a well out of the money put spread on the SPY.
I am using the January week 2 strikes with expiration on Jan 8th. No need to risk a January meltdown.
Sell short Jan Week 2 $195 put, currently .68, stop loss $201.25
Buy long Jan $190 put, currently .38, no stop loss
Net credit 30 cents.
Update 12/30.15: We were stopped out of the short side on the SPY on the 18th. I am going to try and squeeze in another short put to offset the long we are holding. If you are not already holding the long put do NOT enter this position.
Sell short Jan Week 2 $199 put, currently .36, stop loss $203.35
Retain Jan Week 2 $190 long put.
SWKS - Skyworks Solutions (Put Spread)
Skyworks is in rally mode after another Apple supplier Avago (AVGO) reported full year earnings that spiked 83% last week. Investors were afraid that Apple was cutting orders for iPhone components and apparently Avago had not seen those cuts. Q3 revenue rose +16% and earnings +26%. This boosted all the Apple component suppliers including Skyworks.
Earnings are Jan 21st.
Sell short Jan $75 put, currently $1.35, stop loss $79.25
Buy long Jan $65 put, currently .40, no stop.
Net credit 95 cents.
Updare 12/30/15: We were stopped on the short side a couple weeks ago for a loss. The stock has been behaving fairly well and I am going to try and squeeze in another play to go with the long put we are holding. If you are NOT still holding the long put then don't enter this play.
Sell short Jan $73 put, currently .50, stop loss $75.95
Retain Jan $65 long put.
WYNN - Wynn Resorts (Put Spread)
Steven Wynn surprised everyone by purchasing over 1.0 million shares of WYNN stock over the last week according to an SEC filing. This gives him control of more than 11.07 million shares. Steve has always been a buyer on the dips. He knows what his franchise is worth and when the shares are cheap he steps in. When they are expensive he sells a few.
This purchase cost him about $62 million. That is a huge vote of confidence that suggests shares are not going lower. The bad news in Macau cannot get much worse and it is about time for some good news.
Earnings are Feb 3rd.
Sell short Jan $55 put, currently .95, stop loss $58.85
Buy long Jan $45 put, currently .45, no stop loss.
Net credit 50 cents.
Prices Quoted in Newsletter
At Option Investor we have a long-standing policy prohibiting the editors and staff from actually trading the individual recommendations in order to conform to SEC rules concerning trades.
The prices quoted in the newsletter are the end of day prices in most cases.
When discussing fills or stops the prices quoted are the bid/ask at the time the entry trigger or exit stop is hit. This is NOT a price that someone on staff actually got using a live order.
For entry/exit points at the market open the prices quoted will be the opening print. The majority of the time the readers are able to get a better fill than the opening print because of market maker bias at the open.
For trades with an opening qualification the prices quoted will be the bid/ask at the time the qualification was met.
All of these rules normally produce worse prices than an active trader would normally get. Because they are standardized there may be some cases where a price quoted was better than an actual fill. If you received a price that was dramatically different than what was quoted please let us know.