Option Investor

Daily Newsletter, Monday, 12/19/2016

Table of Contents

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

Market Wrap

4 Trading Days Left To Christmas

by Thomas Hughes

Click here to email Thomas Hughes


Only 4 trading days left until Christmas. If there is going to a Santa Claus extension to the Trump Rally it's going to happened this week. Today's action was bullish and a positive sign but not quite enough to label as "rally". Even so, the Dow remains poised to hit 20,000 and could easily do so with only the slightest bit of good news.

International indices were mostly flat in today's session. In Asia this means the indices closed mostly in the red, if with minimal losses. In Europe the opposite as German business sentiment hits its highest level in over 2 years. In both regions trading was quiet.

Market Statistics

Futures trading was a bit muted this morning. The indices were indicated to open with small gains and there was little movement in that all morning. Trading at the open was quiet as well, the indices opened with small gains, made a quick dip to test Friday's closing prices, and then moved higher, if only by a small margin. The SPX hit an intraday high before noon, about +0.50%, and that high held for the day. After that the index pulled back from the high, remaining in positive territory, and trending sideways into the end of the day. Considering events in Turkey and Germany it's a bit of a wonder that the market was able to close higher at all.

Economic Calendar

The Economy

No economic data today but there is quite a bit this week. Due to the holiday, no closures this week, many of the reports will be delivered on Thursday. On the list; Existing Home Sales, 3rd quarter GDP revisions, jobless claims, Durable Goods, Leading Indicators, Personal Income and Spending, Michigan Sentiment and New Home Sales. There is a closure next week, Monday the 26th, so keep that in mind during the week.

Moody's Survey Of Business Confidence rebound by 1.3% in the last week, rising from a 2 week low. According to the survey global business sentiment is holding steady after bottoming out earlier this year. Mr. Zandi says sentiment is firm and shows a global economy expanding at the high end of its potential. Present and future conditions have softened but hiring and investment remain steady.

There have been 5 earnings reports for the 4th quarter so far this cycle. Of those 4 beat on the earnings side, 2 on the revenue. Since the start of the 4th quarter 8 of the 11 S&P sectors have been revised lower while at the same time the 12 month forward looking EPS continues to rise, moving above $130 in the past week. The blended rate of earnings growth has risen because of this, gaining 0.2% to hit 3.2%, the first increase in expectations in 10 weeks. Based on the historical data we can expect to see this figure continue to rise into the end of the cycle, possibly as high as 8%. Touching base with the energy sector, the single leading cause for all-index earnings decline over the past year, 4th quarter growth is expected to be flat at -0.01%, the first quarter the sector has not seen high double digit declines in earnings in more than 4 quarters.

Full year 2016 earnings growth outlook remains firm at 0.1% but is also likely to rise by the end of the cycle. Positive earnings growth is also expected to continue into next year and those expectations have expanded in the past week from 11.4% to 11.5%. First quarter 2017 growth is expected to rise to 11.2%, slightly lower than last week's estimate, while the 2nd quarter was revised higher to 10.6%. Third and fourth quarter estimates remain above 12%.

The Dollar Index

The Dollar Index made gains today after a morning spent testing near term support. The index rose 0.25% and set a new closing, but not intra-day, high. The indicators are bullish and confirm the move, suggesting that higher prices are on the way. This move is supported by economic trends, FOMC expectations and continued to QE from central banks like the ECB and BOJ. Upside targets remain at $105, targets for support are $102.50 and $100.50 should the index decide to pull back. Risks at this time include surprise comments from FOMC members, weak economic data, a toning down of FOMC outlook for 2017 and/or strength in overseas economies.

The Oil Index

Oil prices closed with a gain today, after a see-saw day as traders try to make sense of supply/demand outlook, the OPEC deal and early signs that the deal is being adhered to. WTI settled up about a half percent, just over $52 a barrel. Prices may hover at or near this level in the near to short term while we wait to see what really happens with supply, and market imbalance is corrected. Until then I remain skeptical but certainly open to a change in fundamentals. Even without a further advance in prices, current prices are enough to support outlook for earnings growth in the energy sector.

The Oil Index lost a half percent in today's session but remains within a near term consolidation pattern. The index has been trending higher in the near term on OPEC hopes and rising oil prices but recently reached a peak. The indicators are mixed, bullish but consistent with a peak and possible test of support, as is oil price outlook but it may not matter. Earnings outlook for the sector is robust for 2017, up nearly 350% after being down roughly -75% in 2016, and could easily keep investors interested and this index moving higher. The near term consolidation in which the index is now moving may become a flag pattern with upside target near 1,500.

The Gold Index

Gold prices held firm near $1140 but remain near long term lows. Prices were lifted by early weakness in the dollar but those gains were capped. Longer term outlook remains bearish, the FOMC is on a path of tightening and dollar strengthening, so I am not expecting to see any major rebounds in this metal anytime soon.

The gold miners remain under pressure as well. The miners ETF GDX gained about a half percent in today's session but is just holding steady near the recent low and below the 61.8% retracement level. The indicators remains bearish and point to lower prices, downside target remains near $16.50. Firm resistance is likely to be found near $20 should the ETF, or gold prices, decide to move higher.

In The News, Story Stocks and Earnings

Disney was one of today's top gainers. It's movie, Star Wars Rogue One, performed much better than expected bringing in more than $155 million in weekend box office sales. The stock rallied nearly 2% intraday but was capped by resistance. The success of Rogue One is great and cements the future of the Star Wars franchise but there are other issues to consider, including ESPN. Resistance is the 1 year high and does not look like it will be broken at this time. However, if it is, upside target is near $110. Support target, near term, is near $102.50.

Cintas was added to the NASDAQ 100 this morning. Cintas also reports earnings this week and should show another quarter of solid organic and acquisition growth. The company is the nations largest and #1 distributor of rental uniforms, safety and safety products for employers and employees with a long history of growth. Year to year earnings growth has been in the double digits since the current recovery began and on track for the same this year. On top of that the company has been in a multi year cycle of dividend increases, delivered annually, and continued this year. The company's strength lay in organic growth, supported by labor trends, that is super charged by the acquisition of new territory and business opportunities such as last years addition of ZEE Medical. The stock has been hovering at all time highs for about 2 weeks, since the announced inclusion, and could pop on earnings.

The VIX fell more than -3.0% today and is fast approaching the recent and long term low. The index shows a decline in fear, or at least the prices of options, and looks set to hit the low in the next day or so. The indicators are bearish and firing a sell signals, suggesting lower prices are the way, indicative of rally in the underlying S&P 500.

The Indices

The indices moved higher today but not strongly and no new all time highs. Today's leader was the Dow Jones Transportation Average which gained 0.72%. The index has retreat to the previous all time high and possibly at a support level. The index has, over the past 2 weeks of trading days, begun to form a classic flag pattern that bears watching. The indicators are consistent with a peak within an up trend and test of support so this pattern may not be fully formed, support target is currently 9,150, a break below here may find support at 9,000 or 8,500.

The NASDAQ Composite made the 2nd largest gain today, 0.37%. Despite the gain the index did little more than trend directly sideways for the 5th day in a row, and close just shy of the current all time high. The index is in a near term consolidation/congestion zone that could easily become support or resistance once price begins to move away from this level. The indicators are mixed in the near term but generally bullish although there is divergence in the short term that suggest some weakness in the market. A break to the upside would be bullish, target 5,750, a break to the downside would be bearish, target 5,450 or 5,350 in the near term.

The Dow Jones Industrial Average made the 3rd largest gain, 0.21%. The blue chips created a small white bodied candle with visible upper shadow, indicative of some resistance to higher prices, but price action is nothing more than another day, the 5th, of sideways action at the current all time high. Today's action leaves the index within 125 points of 20,000 with mixed indicators. The reading is bullish but like with the other indices divergences in the short term and mixed signals in the near suggest that support may be tested at current levels with the chance for a deeper pullback or correction. The caveat is that the current movement, the Trump Rally, was strong to begin with and may continue higher in the near to short term before momentum is fully exhausted. Near term support is just below today's open, near 19,750, a break below here would be bearish in the near to short term with downside targets near 19,500 and 19,250.

The S&P 500 made the smallest gain in today's session, only 0.20%. The broad market created a small white bodied candle, the 5th consecutive at this level, and looks like it is forming a flag continuation pattern. The caveat is that indicators, like with the other indices, are consistent with consolidation/pull back which leaves the door open for a deeper pull back to support than what we have currently seen is possible. If the index does continue the rally upside targets are 2,300, 2,350 and 2,500.

Today's action was simply another day of consolidation at the current all time highs while the market decides what it wants to do. The price patterns are highly suggestive of continuation, the indicators are beginning to come in line with that assessment, all we need now is the break out to confirm. This week could easily see it happen, there is little in the way of major market moving economic events or data on the calendar and earnings reporting will be light. I'm bullish in the near term, bullish in the long term, still cautious in the short term but ready to add another little speculative position in preparation for what could be nice little Santa Rally into the end of the year.

Until then, remember the trend!

Thomas Hughes



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New Option Plays

Making Smart Decisions

by Jim Brown

Click here to email Jim Brown

Editors Note:

Making money in the market means making smart decisions. Sometimes that means staying out of the market. In the current environment the market "should" maintain a positive bias through Friday. The first three days of next week are a tossup but the last two days have a very good chance of posting losses. Once we enter January the odds of a significant decline increase sharply.

This is not a trading newsletter. There is nothing I can recommend today that we buy for a potential 3-4 day gain and then exit. The odds of a gain the rest of the week are only slightly better than 50:50. We should not trade unless there is a better chance of a longer term move. Option premiums decrease every day that the underlying stock does not rise. We do not want to buy a depreciating asset when the market is heading into a potential decline 7-10 days from now. Be patient. There is a buying opportunity ahead.


No New Bullish Plays


No New Bearish Plays

In Play Updates and Reviews

Just Passing Time

by Jim Brown

Click here to email Jim Brown

Editors Note:

The indexes all closed off their highs as we wait for the post holiday fireworks to begin. The morning rally immediately ran into trouble but the gains and losses were muted. This is likely to be the pattern the rest of the week. The volume is going to slow to a trickle after Tuesday and the market is likely to trade sideways with a positive bias through Friday.

The Dow closed under 19,900 once again and the intraday ranges are narrowing. We could see another attempt to hit 20,000 this week. The Nasdaq Composite gained 20 points but closed -27 points below its intraday high. The sellers are still camped out at the higher levels.

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

CAT - Caterpillar

The long put position was entered at the open.

If you are looking for a different type of option strategy, try these newsletters:

Credit spreads and naked puts = OptionWriter

Long term option investments = LEAPS Investor

3-6 month Option Trades = Ultimate Investor

Iron Condors = Couch Potato Trader

Long and short equity trades = Premier Investor

BULLISH Play Updates

ADP - Automatic Data Processing - Company Profile


No specific news. New 52-week high.

Original Trade Description: December 5th.

Automatic Data Processing, Inc., together with its subsidiaries, provides business process outsourcing services worldwide. The company operates through two segments, Employer Services and Professional Employer Organization (PEO) Services. The Employer Services segment offers a range of business outsourcing and technology-enabled human capital management (HCM) solutions, including payroll services, benefits administration services, talent management, human resources management solutions, time and attendance management solutions, insurance services, retirement services, and tax and compliance solutions. This segment's integrated HCM solutions include RUN Powered by ADP, ADP Workforce Now, ADP Vantage HCM, and ADP GlobalView, which assist employers of all sizes in all stages of the employment cycle from recruitment to retirement; and ADP SmartCompliance and ADP Health Compliance. The PEO Services segment provides a human resources (HR) outsourcing solution through a co-employment model to small and mid-sized businesses. This segment offers ADP TotalSource that provides various HR management services and employee benefits functions, such as HR administration, employee benefits, and employer liability management into a single-source solution. Company description from FinViz.com.

ADP reported a 26.5% rise in earnings to 86 cents that beat estimates by 9 cents. Revenues rose 7.5% to $2.92 billion and beat estimates for $1.91 billion. The number of employees on client payrolls rose 2.7%. They ended the quarter with $2.82 billion in cash and long-term debt of $2 billion. The announced the sale of their CHSA and COBRA business to WageWorks for $235 million. The sale will be completed in Q2 2017.

The company guided for 2017 revenue growth of 7% to 8% and 15% to 17% earnings growth. The PEO Services segment revenues are expected to rise 14% to 16%.

The company just declared a 57-cent quarterly dividend to raise the annual dividend to $2.28.

Earnings Feb 1st.

ADP holds a dominant position in the payroll processing sector. With employment expected to rise again in 2017 this could be an attractive investment for funds that are tired of chasing industrials and bank stocks in the current rally.

Shares took profits last week from a very nice climb and could be ready to try for a new high.

There is resistance at $97 but given the time of year and the overbought conditions in the rest of the market, we could see a breakout. Options are relatively cheap.

Position 12/6/16:

Long Feb $97.50 call @ $2.10, see portfolio graphic for stop loss.

FFIV - F5Networks - Company Profile


No specific news. Still holding above prior resistance.

Original Trade Description: November 21st.

F5 Networks, Inc. develops, markets, and sells application delivery networking products that optimize the security, performance, and availability of network applications, servers, and storage systems. It offers Local Traffic Manager, which provides intelligent load-balancing, traffic management, and application health checking; BIG-IP DNS that automatically directs users to the closest or best-performing physical, virtual, or cloud environment; Link Controller, which monitors the health and availability of each connection in organizations with more than one Internet service provider; Advanced Firewall Manager, a network firewall; and Application Security Manager, an Web application firewall that provides comprehensive, proactive, and application-layer protection against generalized and targeted attacks. The company also provides Access Policy Manager, which provides secure, granular, and context-aware access to networks and applications; Carrier-Grade Network Address Translation, which offers a set of tools that enables service providers to migrate to IPv6 while continuing to support and interoperate with existing IPv4 devices and content; and Policy Enforcement Manager that offers traffic classification capabilities to identify the specific applications and services to service providers. In addition, it offers cloud-based and other subscription services; BIG-IP appliances; VIPRION chassis-based systems; and Traffix Signaling Delivery Controller for diameter signaling and routing. Company description from FinViz.com.

The big attack on the Internet several weeks ago was driven by malware that had been placed on IoT devices including security cameras, cable boxes, burglar alarms and dozens of other device types. These devices are typically delivered without any material malware defenses. It is up to each manufacturer to overcome this in the future with some kind of defense.

However, FFIV provides software and hardware to prevent denial of service attacks from these devices as well as the more robust attacks from computers and servers. With more and more servers in the cloud it is harder to protect them from attack like you would dedicated physical servers in a dedicated data center. This is where FFIV excels.

The company's Silverline service places a sophisticated cloud based filter around critical infrastructure that stops attacks instantly. Aided by hardware based firewalls in dedicated data centers they protect data and equipment from all outside attacks.

For Q3 they reported earnings of $2.11 compared to estimates for $1.94. revenue of $525 million beat estimates for $520 million.

Earnings Jan 21st.

FFIV shares spiked on earnings in late October and have been moving steadily higher. They are about to break over resistance at $144 and we could see another leg higher when that happens.

Position 12/8/16 with a FFIV trade at $142.25

Long Jan $145 call @ $3.80, see portfolio graphic for stop loss.

UNH - UnitedHealth - Company Profile


Shares were off -$2 after WellCare (WCG) guided below analyst estimates for 2017. UNH shares were guilty by association.

Original Trade Description: December 7th

UnitedHealth Group Incorporated operates as a diversified health and well-being company in the United States. The company's UnitedHealthcare segment offers consumer-oriented health benefit plans and services for national employers, public sector employers, mid-sized employers, small businesses, individuals, and military service members; and health care coverage, and health and well-being services to individuals aged 50 and older addressing their needs for preventive and acute health care services. It also provides services dealing with chronic disease and other specialized issues for older individuals; Medicaid plans, Children's Health Insurance Program, and health care programs; and health services, including commercial health and dental benefits. This segment serves through a network of 1 million physicians and other health care professionals, as well as approximately 6,000 hospitals and other facilities. Its OptumHealth segment offers health management services, including care delivery and management, wellness and consumer engagement, distribution, and health financial services. This segment serves individuals through programs offered by employers, payers, government entities, and directly with the care delivery systems. The company's OptumInsight segment provides software and information products, advisory consulting services, and business process outsourcing and support services to hospitals, physicians, commercial health plans, government agencies, life sciences companies, and other organizations. Its OptumRx segment offers pharmacy care services and programs, including retail pharmacy network management, home delivery and specialty pharmacy, manufacturer rebate contracting and administration, benefit plan design and consultation, claims processing, and clinical program services, such as formulary management and compliance, drug utilization review, and disease and drug therapy management. Company description from FinViz.com.

UNH will have about $184 billion in revenue in 2016 to put it at number six on the Fortune 500 list. With its broadening of scope using its various Optum programs it is maximizing profits by widening the service component of its business. Here is an excellent article on why UNH will be the most profitable. Amazon of Healthcare

I am not going to go into an in depth explanation of UNH. That article I referenced has plenty of information why UNH should be a long term holding of any investor.

Earnings January 17th.

I wanted to play UNH last week when it was at $152 but it had resistance at $153 and I decided to wait another day to see if that resistance was broken. Shares gapped up to $158 at the open the next day and ran to $162.50 over the next four days. Now that big gain has been digested and shares pulled back to $156 before adding a couple dollars on Wednesday. I believe the UNH rally will continue for the reasons listed in that article above. I am willing to take a shot here that the market rally also continues even if Wednesday's futures related spike fades in the days ahead. We have 16 trading days until 2017 and we should close the year at higher levels.

Position 12/13/16 with a UNH trade at $160.25

Long Jan $165 call @ $2.58, see portfolio graphic for stop loss.

VRTX - Vertex Pharmaceuticals - Company Profile


Shares were down slightly despite an agreement with Germany for a reimbursement plan for Orkambi, their leading cystic fibrosis drug.

Original Trade Description: December 14th.

Vertex Pharmaceuticals Incorporated engages in discovering, developing, manufacturing, and commercializing medicines for serious diseases. The company focuses on developing and commercializing therapies for the treatment of cystic fibrosis (CF) and advancing its research and development programs. It markets ORKAMBI for the treatment of patients with CF 12 years of age and older who have two copies (homozygous) of the F508del mutation in their CFTR gene; and KALYDECO (ivacaftor) for the treatment of patients with CF 6 years of age and older who have the G551D mutation in their CFTR gene. The company also develops VX-661, a corrector compound that is in a Phase III development stage in combination with ivacaftor in multiple CF patients; VX-371, an investigational epithelial sodium channel, which is in a Phase II development stage; and VX-152 and VX-440 that are CFTR corrector compounds in Phase I clinical trial. In addition, it engages in the research and mid-and early-stage development programs in the areas of oncology, pain, and neurology. Company description from FinViz.com.

Vertex missed earnings by 2 cents with a 17 cent loss that was significantly better than the 39 cent loss in the year ago quarter. Sales of Kalydeco rose 6% to $176 million and revenue for Orkambi jumped 79% to $243 million. The problem is that the drugs have a very limited patient population in the U.S. of about 11,000 for this version of cystic fibrosis. They are close to receiving approval in the EU for these drugs. They have expanded their testing into other population groups to see if the drugs will continue to perform in other versions. There are 2,000 known mutations of the disease.

Shares declined in late November when one of the trials on a specific mutation failed to produce any additional results.

Shares have bottomed at the early November lows and have begun to rebound. If the market rolls over, Vertex could become a favorite oversold opportunity for institutional investors looking to put some profits back to work in a beaten down stock.

Earnings January 26th.

We cannot buy a post earnings option because there is no February strike and March is grossly expensive. That means the January expiration is our only option.

Position 12/15/16:

Long Jan $82.50 call @ $2.70, see portfolio graphic for stop loss.

BEARISH Play Updates (Alpha by Symbol)

CAT - Caterpillar - Company Profile


No specific news. Shares gapped lower to $91 at the open and we saw a slightly elevated fill on the put price. The stock rebounded $1.50 but the long-term outlook remains the same.

Original Trade Description: December 17th

Caterpillar Inc. manufactures and sells construction and mining equipment, diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives worldwide. The company's Construction Industries segment offers backhoe, small wheel, skid steer, multi-terrain, compact track, medium and compact wheel, and track-type loaders; mini, wheel, and track excavators; track-type tractors; and select work tools, motor graders, telehandlers, soil compactors, and pipelayers, as well as its related parts for the heavy and general construction, rental, mining and quarry, and aggregates markets. Its Resource Industries segment provides electric rope and hydraulic shovels; draglines; drills; highwall and longwall miners; hard rock vehicles; articulated, large mining, and off-highway trucks; large wheel loaders; wheel tractor scrapers; wheel dozers; machinery components; hard rock continuous mining systems; electronics and control systems; and select work tools for use in mining and quarry applications. The company's Energy & Transportation segment offers reciprocating engines, generator sets, marine propulsion systems, gas turbines and turbine-related services, diesel-electric locomotives, and other rail-related products and services. Its Financial Products segment provides retail and wholesale financing for Caterpillar equipment, machinery, and engines; offers property, casualty, life, accident, and health insurance; insurance brokerage services; and purchases short-term trade receivables. The company's All Other segments remanufactures Cat engines and components, and provides remanufacturing services for other companies; offers business strategy, and development, management, manufacturing, marketing, and support primarily for paving, forestry, industrial, waste, and Cat products. Company description from FinViz.com.

Caterpillar's business has been in decline for several years as the energy sector went into hibernation and Asia's economic growth appeared to slow. For some reason, the stock bottomed on January at $58 and rallied to almost $100 despite a weak outlook in every earnings cycle. The $18 post election bounce was just another example of irrational exuberance. The election did not sell more tractors overnight and a pickup in their business could be several quarters away.

The best thing Caterpillar has in its favor is OPEC's decision to cut production. That means a year from now oil prices may have recovered slightly and energy companies may begin to buy more tractors. That is a long time off for an $18 spike.

Earnings in 2014 were $6.38, 2015 $4.64, 2016 they are estimated to be $3.26 and for 2018 analysts expect $3.15. However, CAT said last week that the estimates were overly optimistic. While Asian sales may have quit declining there is no material rebound at present.

Earnings Jan 24th.

This is a play on the retracement of that $18 bounce. When the company says analyst expectations are overly optimistic you can bet analysts will begin to lower their numbers. That should produce an extra weight on the stock in addition to any normal decline with the Dow in January.

The earnings are Jan 24th and the February options are expensive. Since this is a short-term position, I am recommending the January options. I believe any material decline will happen in the first two weeks of January.

Position 12/19/16:

Long Jan $90 put @ $1.89, see portfolio graphic for stop loss.

DIA Dow ETF - ETF Profile


No material progress. The Dow traded in a very narrow range and barely avoided going negative early in the afternoon. Market should continue to be choppy this week.

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.

GATX - GATX Corporation - Company Profile


No specific news. Minor gain in a positive market as funds try to keep maintain their profits with window dressing. There is no fundamental reason for the stock to rally this much post election.

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 45% 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 45% 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, no initial stop loss to avoid any volatility spikes.

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