Archive | Trades

Trading Call Diagonal Spreads on BofA’s 10 Stocks for 2014

Tuesday, December 10, 2013

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Bank of America Merrill Lynch's equity and quant strategy team publishes a list of stocks each year, choosing one from each GICS sector. The stocks are selected based on quantitative screens and...

When will gold lose its luster?

Monday, February 4, 2013

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The outlook for gold in 2013 was more mixed than in years prior, but several investment banks maintained bullish price targets. Morgan Stanley, Barclays, Bank of America, and Société Générale all have year-ahead price targets of $1800 or higher. Here’s the thematic outlook from a recent report by the cross-asset team at Soc Gen: Our commodities team is calling for renewed price strength in gold prices into 2013. They currently forecast gold rising to an average of $1,850/oz…

Barclays (BCS) shows lending momentum with IV skew at a multi-year low

Monday, December 10, 2012

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After being down nearly 20% over the summer, Barclays shares have rallied steadily through the fall and are set to close the year with a 35% gain. In spite of recent performance, the bank is still trading at a 25% discount to its peers. Improving fundamentals and historically cheap option implied volatility make upside call spreads look attractive through January. Fig. 1. Barclays PLC ADR (BCS) and Financial Sector SPDR (XLF), 2012. Source: Yahoo! With much of the U.K.…

Trading the Volatility Spike in YUM! Brands

Monday, December 3, 2012

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YUM! Brands has been regarded for some time as a play on discretionary spending in China – as part of the shift from exports to domestic consumption. Given that framing, YUM investors are pretty sensitive to changes in data coming out of China. After the market close on Thursday, YUM guided lower on Q4 sales in China. Half of the operating profit in the third quarter came from China, so a forecast for a 4% drop in same-restaurant sales…

Hedging against an unclear election

Monday, November 5, 2012

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The election this week has sparked countless articles about the likely effects of an Obama or a Romney win on various sectors of the economy, but in the short term, traders should focus not on the effects of a win by one party, but on the effects of an unclear outcome for either party. The FX team at Citi recently called a disputed electoral outcome the “biggest political risk” facing markets right now: We view most of the…

A Trade Idea Ahead of the Greek Election

Thursday, June 7, 2012

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I have some quotes in a Reuters article today about options trade ideas in advance of the June 17 election in Greece. I said that: investors can gain some short term exposure by selling a time spread. This is another kind of volatility bet, using short-term or weekly options on the S&P 500 index. For example, buying the SPX 1300 puts expiring June 22 and selling the SPX 1300 puts expiring July 6 recently could be…

What’s Your Volatility Thesis for 2012?

Monday, February 13, 2012

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Here’s one for all you volatility traders. You have to take a position in some combination of the following contracts (and only the following contracts), and hold it for all of 2012. The position will be closed out on the last day of December. CBOE Volatility Index® (VIX®) Futures EURO STOXX 50® Volatility (VSTOXX) Futures (V2TX) CBOE Emerging Markets ETF Volatility Index (VXEM) CBOE Gold ETF Volatility Index (GV) What’s your take? For this hypothetical, we’re limited to only those…

Trading the End of the Risk On / Risk Off Environment

Tuesday, November 8, 2011

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What if the “risk on / risk off” market environment comes to an end, even for a little while? This article explores a trade designed to profit from that possibility. The CBOE Implied Correlation Index got a lot of attention around the blogosphere and on Twitter last week, following Tuesday’s intraday spike to 103 and closing value above 80. Regular readers of my posts here are already familiar with the index, so I won’t delve into a thorough explanation except to…

Trading Apple’s Relative Performance with AVSPY

Wednesday, October 5, 2011

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AAPL really took it on the chin on Tuesday, as traders were apparently of the view that the most important feature of the next iPhone would be its name. I wrote up a trade using the NASDAQ OMX Alpha AAPL vs. SPY Index (AVSPY) options for TheStreet’s Options Profits service, and the article got picked up for the free site and is featured on their main options page. These new Alpha Index products aren’t super-active, but a 3000-lot trade…

FCX: A Play on Copper and Declining Growth

Wednesday, September 21, 2011

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Is copper really a base metal? Hardly. It’s one of the most important leading indicators of global growth and especially producer sentiment in emerging markets. That’s why the dour outlook from mining heavyweights in recent days is such a cause for concern. Rio Tinto (RIO), Cargill, and Codelco have all provided warnings about weakening demand as their customers seek to delay shipments. (FT) My outlook on commodity demand and especially copper has shifted from positive to vaguely negative over the last several…

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Jared Woodard specializes in trading volatility as an asset class. With over a decade of experience trading options and other volatility products ... Read More

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