Feb 23, 2016
Trading Block: Options market sees 50% chance of massive S&P plunge. Stocks may have rebounded from their recent lows, but the option market still implies a big chance that stocks plummet anew before the year is out. Earnings today after the bell: Fitbit, Inc., ATM Straddle: $2.90 - 18.3%, calls 2/1 over puts; stock nearly hit $52 last summer: Now a pale shadow of what it used to be. Earnings today before the bell: Dean Foods.
Odd Block: Puts trade in Zoetis Inc. (ZTS), puts trade in Rio Tinto PLC (RIO), and puts trade in Prospect Captial Corp (PSEC).
Strategy Block: Tosaw dicusses ways to construct a wheel trade.
Listener Questions: Listener questions and comments
- Question from Alex - Thanks Mark for the funny intro of me and featuring my question. I felt honored to get my simple question dissected so well. I loved it! You started the discussion with "there are not that many scenarios to short long term puts as a way to enter into equity unless there is some extreme volatility distortion where the 1 year put is extremely bid from a volatility perspective". My follow up question is then: Does the 1 year LNKD Implied Volatility not qualify as a such "extreme volatility scenario distortion". Check attached screenshot from OptionXpress below. The highlighted region is when I shorted the 25 Delta Put and ATM Implied Vol is at its highest ever. Definitely I would suggest a boot camp on commission fees and slippage costs and why even with those it is still better to do shorter term vs longer term dark side trades. Cheers, Alex
- Putting it concisely: Vega, Theta, low commissions and slippage costs are working for me in this one.
Around the Block: Earnings!
- Tuesday - Home Depot, Avis Budget Group, Caesars Entertainment, Coca Cola, Dreamworks, Macys, Office Depot
- Wednesday - Target, Salesforce.com
- Thursday - Best Buy, Sears, Anheuser- Busch, Gap, Gogo Inc., Herbalife, Kohls, Marriott Vacations Worldwide, SeaWorld Entertainment, Starwood Property Trust, Weight Watchers
- Friday - JC Penney Company, Hilton Worldwide
It is fairly a heavy week as far as economic reports go including GDP and Consumer Sentiment. The market looks to keep the bullish rally going.
- Feb 23: Consumer Confidence, Existing Home Sales
- Feb 24: New Home Sales
- Feb 25: Durable Goods, Jobless Claims
- Feb 26: GDP, Consumer Sentiment