Category Archives: Options

AAPL: Who Knew???

By -

In Chicago we have a saying – the tape doesn’t lie.

Check out the open interest for the February 2016 option contracts on AAPL prior to earnings today.  This snapshot was taken at approximately 11:28AM ET on January 26 (the morning before the earnings release) and AAPL was trading right around $100 at the time.  Open interest suggests many permabulls were loading up in the days leading up to Tuesday’s earnings release.

Then, check out the disparity in put option contract volume today.  Who knew?

AAPL

Where will AAPL head on Wednesday?  The market maker move was anticipated at roughly +/- $6 above or below that nice round $100 level.  What will AAPL do on Wednesday?  Who knows.

A Hedged Bet Against Small Caps

By -

Another 3x Bearish ETF Appears In Our Top-10

Happy New Year, Fellow Slopers.

I just saw a 3x bearish ETF (TZA) pop-up among the ten highest-ranking names on Portfolio Armor‘s daily ranking of optionable stocks and exchange-traded products by potential return net of hedging cost. Usually, it’s just stocks in that top-10, but the last time an ETP appeared there it was another bearish ETF, YANG. I posted about that here in November (“A Hedged Bet Against China“), and since then, YANG has gone on a decent run. Maybe something similar will happen with TZA? Just in case it goes pear-shaped, though, I’ve posted a hedge for it below. First, a quick look at how YANG has done since our November post on it.

Screen Shot 2016-01-13 at 7.09.47 AM

Background On How We Calculate Our Ranking (more…)

A Hedged Bet Against China

By -

Every trading day, Portfolio Armor ranks all of the hedgeable stocks, ETFs, and other exchange-traded products in the U.S. by its estimate of their potential return over the next six months, based on an analysis of price history and option market sentiment. Then it subtracts hedging costs, and ranks them all by potential return net of hedging costs, or net potential return. It’s a method of security selection we backtested 25,412 times over an 11-year time period during which it generated solid returns, on average.

On Thursday, the highest-ranked ETF, and the 7th-ranked security overall, was the Direxion Daily FTSE China Bear 3X Shares ETF (YANG), a triple-levered bet against China, with a potential return of 13.6% over the next six months.

As of Thursday’s close, you had a shot of capturing that potential return, while limiting your downside risk to 13.6% – and getting paid to hedge – by using the optimal collar below: (more…)

Two Ways Of Hedging Disney

By -

Dying To See Star Wars

One of the trending hashtags on Twitter in recent weeks was #ForceForDaniel, a campaign to get an early screening of the new Star Wars movie for a dying fan, Daniel Fleetwood. Director J.J. Abrams had the film screened for the man at his home, as The Verge noted below.

It wasn’t the first time, incidentally, that Abrams accommodated a dying fan: In 2009, he gave the late Randy Pausch (of Last Lecture fame) a cameo in his Star Trek reboot.

A Boost For Disney  (more…)

Two Ways Of Hedging ATVI

By -

Our Current Number One Stock: Activision Blizzard

Activision Blizzard (ATVI), which just announced its purchase of King Digital (KING), the Dublin-based maker of the Candy Crush mobile gamecurrently has the highest potential return of any security in Portfolio Armors universe, at 20.8%. Potential return, in our terminology, is bullish estimate of how a security will perform over the next months. Below, we’ll explain how we calculate potential return, and then we’ll show a couple of ways of hedging ATVI.

How We Calculate Potential Return (more…)