41 FOMC said what people wanted to hear, but my book, and the market as a whole is not at all ripping. I guess it was priced in already? Or, investors are saying, “prove it.” I had literally no emotional response when I heard the news. I am guessing this would be the majority trend.
Some dumbasses upgraded ZNGA to Outperform, this resulted in an OB signal in The PPT. I am now short, I am also short GMCR. I sold YELP for an egregious loss, fuck that thing. I covered FSLR for a nice little 1% gain this morning. Fuck fucking YELP, I should have shorted when I went long. I cannot get a fucking edge on that whore of a security.
Even the “pro’s” don’t have anything important to say. This is dumb, or is it just priced in?
The only Descendants song my lady likes.
http://www.youtube.com/watch?v=43-020gGQtw
41 Responses to “It’s All Priced In”
elizamae
We are at ‘post-crisis’ highs…so I don’t see much of a need for (additional) intervention. Then again, I have no fucking clue what I’m talking about.
Anyway, like Chess has said, I think the fact that we aren’t seeing any sort of meaningful sell off lends to the idea that we are correcting through time vs. price.
I’m going to use the PPT OS readings (on individual stocks) to keep my eyes peeled in order to buy some fucking dips.
Rhino
Man I have been getting crushed on longs, my only real success has come from shorts. I don’t know why.
elizamae
BEARSHITTER!!!111!!
Seriously, if I have time I’m going to do a post on how I have been using the PPT OS algo’s with great success recently…maybe it could help.
Rhino
you should! Timing is the hardest thing for me.
Arctic Gambino
I’m a (bathsalts) pro. I say go long the product by using in mass quantities.
Rhino
After what happened in YELP, I could use some salts.
Arctic Gambino
on a side note. You best be bringing your A game to the draft. Ya hear!
Rhino
My lists are all ready to go.
redman59
The FOMC is all hype anymore as it seems nothing in their language changes. As tempted as I was to get into YELP, I told myself it is not worth it as it seems like a mental drain stock.
I do like the idea by Chess and what EM re-stated that we are correcting through time and not price, makes sense given recent action. As for me I took on positions in BIDU & IBM today and that is all.
I have to say my favorite Descendents song is Hope, that one never gets old….but not so much a ladies song.
Rhino
I agree, also Bikeage and ‘Merican. I may drop an HPQ short before the bell.
Arctic Gambino
Long better than short on HPQ. Too many people betting against it now.
Rhino
You think they beat earning?
Rhino
Fuck it I’ll short 20 shares, if it goes down it goes down hard, if it goes up it takes the escalator, not the elevator.
Arctic Gambino
Well my timeframe is at least 2+ years. But I think this is near or at bottom.
redman59
Yeah another two songs at the top…good luck on the HPQ short, those earnings plays can be fun.
elizamae
Why not buy some OTM puts?
Rhino
They must first stop the behemoth that is AAPL.
Arctic Gambino
Well Apple does control many divisions, but remember HPQ has their foot with enterprise. So while consumer side sucks, they have a lot of muscle to do things on the other side. Again just an uninformed Canadian thesis.
Rhino
I am actually worried about PC’s period.
Arctic Gambino
I just want to get you to 20 comments so the fly gives you tabbed blogger status.
Rhino
hahaha, man you are gonna get me banned. Why do you guys like options so much?
elizamae
Well, you mentioned going short 20 shares, I assume playing for an earnings miss on $HPQ. The weekly 18’s (which is a reasonable target should they miss) are trading at 0.20, with a 0.01 bid/ask spread.
I was asking because if you are just going to take a flier with such a small amount of shares, why not go ‘lotto style’ with the options which will (likely) either explode in price or expire worthless?
Rhino
That may be an avenue for future earnings play, I would love a post on strategy and execution if you could.
Rhino
Thanks guys, I’ll look to start doing some on paper. HPQ’s guidance isn’t looking good.
redman59
Was going to mention options too. That’s the only way I play earnings anymore as I go in accepting a 100% loss on the play.
If I went in with equities with a arbitrary 10% stop on my position and it dropped 15% then I am out more than planned. But if I went in and bought 10 contracts at 0.20 cents then I am willing to lose that full $200 and that is acceptable within my portfolio allocation with little to no damage.
I know you probably know all this but just showing my thought process and I why I trade options. Sometimes I think they are the best stop-loss out there.
elizamae
Thanks redman for saving me the post, as that is pretty much identical to my (now defunct, after the $MRVL disaster) earnings strategy.
noodle
It is good to play it not too far from the money, because if it doesn’t move big you probably lose on implied volatility.
But when it really blows, it blows. I was involved with GOOG earnings a long time ago, when I saw the cheap options exceed 100,000% return overnight. I was kicking myself for making a measly 10 to 1 (lol), but to be honest I have never seen such a dramatic event since.
redman59
No problem EM, glad I’m not alone in that thought process lol. Straight calls or puts are definitely the easy way to go about it but I also try to incorporate a strategy as well and never yet have I played with just single calls or puts but I prefer spreads. I categorized some of my posts (DE,PCLN,MA,BWLD) under Earnings and they show what I all look at going into an earnings trade.
Noodle definitely showed the advantages of using some leverage though and just going with calls or puts, damn that’s a hell of a return.
Rhino
I don’t mess with options really anymore, bid/ask is crazy.
Arctic Gambino
Do or die time with HPQ. Good luck!
drbigboss
HPQ is amazing, just looks so insanely cheap but with a gun to my head I have to say it’s a short here. Virtually every one of their businesses is getting worse and none of them are well positioned. CSCO and everyone else taking their lunch money in enterprise and their entire consumer business is going the way of the Blackberry. not to mention 20-30% of their earnings are from their printer business which is in secular decline.
sure HPQ is cheap but the entire large cap tech space is cheap and I’d rather own a CSCO who “gets it” by raising dividend in low growth or I’d rather long ORCL where they eat their young to make the numbers.
it’s really sold down and short interest is high but I have to say that over the next few years I think it still under performs the other large cap tech names
Rhino
You guys are some smart fuckin dudes, you know that?!
Raul3
Was thinking the same thing. Awesome talks going on here.
MX2101
My observation is long OTM call or put earnings trades are counting on a price move (in the underlying stock) that is much greater than “the market” is predicting.
One thing about options, is it is easy to forget the leverage, and buy too large a position. Part of this is the desire to reduce the percentage size of the commission cost. For example, two contracts at $2 means a 3 to 5 percent round trip transaction cost for most small traders, I think.
The great thing about options is the many different ways to express a trading position.
drbigboss
there have been lots of academic research studies showing near term options ahead of earnings calls systematically over state potential moves due to short term speculators and large firm position hedging. I’m not a fan of options trading on earnings calls as a result because with the big/ask and over stated vol costs it’s worse than horse racing track…. imo
redman59
Nice reply and is accurate from what I have read and heard from traders that were former market makers in options.
I don’t have the exact numbers but I do know and remember that statistically selling the ATM straddle is more favorable over time.
Using the horse track, it would be like going and betting on the horse that wouldn’t win…winning bet over time but then you would have that occasional blow out (ie. the horse winning). Either way, the options market does quite well pricing them efficiently.
MX2101
Yes, as I recall with GOOG, AAPL, CMG, etc. the OTM options expiring right after earnings were well priced beforehand, with regard to the expected earnings reaction move. The outlier is when a PCLN moves 120 points when everyone expected (and priced for) 50.
What puts my mind at ease is looking at both sides. Some folks went from $ 20 to 0.01 bid. Others had a dream come true.
Both were gambling.
Getting back to the larger point- options can be much more than lotto bets.
MX2101
I’m a Piker, so take these thoughts with a grain of salt-
1. SPY ITM weeklies can be used to trade a move expected within the week with minimal premium overhead. The premium is small, and essentially you have a tracking price. For example, today the weekly 135 calls closed at $ 6.97 ask, only about 0.15 premium. Those will move $100 with every SPY point with mimimal decay, nearly a pure directional play.
The choice of the ITM strike price would be the desired risk (volatility) of the position, balanced off with the volume of the strike (i.e. bid/ask spread).
You can be royally messed with in thinly traded OTM and out month options. Be patient, and cancel your limit order if you do not like the action at the moment.
2. Another approach is to express your long term view with long, moderate ITM out month calls (or puts), and trade against that with long, slightly ITM weeklies in the opposite direction. For example, you think the market will tank in September? OK, buy some Oct 150 puts for about $ 9.25. Then if the bull torments you, trade against the puts each week with slightly ITM SPY weekly calls. If your market crash happens the gain on the out month October puts will quickly overtake the loss on the weekly calls.
3. Or just bet. Right now there is about 0.50 premium in the slightly OTM SPY calls and puts, with two trading days. If you go that route you just gotta step up and make your bet.
btw- Check out the CBOE site for information on trading hours. If your options are trading that day until 4:15 PM NYC time, no need to get into the funnel at 3:55 PM
elizamae
Noodle,
I would agree with you regarding playing ‘close to the money’ strikes on the weeklies.
Nevertheless, if you do want to go ‘lotto style’, I feel like there needs to be a volatility catalyst in order to really hit a home run going with ‘more extreme’ strikes. Earnings usually will provide heightened volatility, thus fulfilling that requirement. Now you just need the price to move in your favor.
Thing is, I came up empty with $MRVL into earnings; however if things went the other way, “elizamae” and Family would have been treated to a fabulous evening at Red Lobster.
elizamae
oops, that was meant to be a “general reply”, not to your particular post MX (though you do make some excellent points).
Yes, I Was Long BIDU Into Today « redman59
[…] the whole position doesn’t compromise more than 5% of my account. Last night I replied in Rhino’s post that I had put on long positions (via credit spreads) in IBM and BIDU. Well you can probably guess […]