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Thursday, February 17, 2011

Is it insider trading or luck?

One way to find great trading ideas is to look to the options market and try to figure out where the big money bets are being put. When you see people making huge bets and buying blocks of calls in the 1,000s vs prior open interest in the sub-100's, it usually can mean that someone is either really confident or has some sort of inside information. Here are two recent examples:

Coinstar (CSTR):

On 2/14/11 somebody bought 5,071 Feb 42.5 option straddles for around $2.83 per straddle. A straddle is the simultaneous purchase of the call and put in the same strike and same month. The buyer is betting on a large move in either direction. These options expire worthless on Friday. (technically Saturday, but markets are closed)

On 2/17/11, Redbox announces they are going to launch a streaming business to compete against netflix. The stock shoots up >7% after-hours. Tomorrow morning those straddles will be worth between 4-5 dollars per straddle.

Weight Waters (WTW)

2/14/11: A block of 4,273 Feb $45 calls were bought for .95. Stock was trading at $44/share.

2/17/11: Earnings are announced. The stock shoots up $20 or 45%. The calls that were selling for .95 are now selling for $20.21 or a gain of roughly $8 million dollars depending on when they were closed out. All in the matter of 4 days.

Makes me think some people are trading on non-public information! Or they are just extremely lucky!

Wednesday, February 16, 2011

Ladies, I feel your pain

I, too, am a victim of constant leering and gawking. Some people just don't realize how much of a burden this sexy rear end really is.

Tuesday, February 15, 2011

Happy Valentines (a day late)!5760394/heres-a-video-of-dogs-saying-i-love-you

Monday, February 14, 2011

The most boring 30ish% return of all time

Wal Mart is one of the most boring stocks ever. It basically just hangs out in the $45-55 range. Even during the financial crisis, Wal Mart only went down to $43/share. The people of Wal Mart, on the other hand, are always exciting. Other stocks have rebounded 100-500% off their lows of the financial crisis, but boring old Wal Mart is only up 27% from its lows. I don't expect it to go much higher anytime soon. Neither do most people, as JP Morgan downgraded the stock because they see low income people leaving Wal mart for cheaper discount stores and other shoppers ditching wal mart for pricier retailers. However, Wal Mart is the largest retailer in the US, is expanding in emerging markets rapidly, and sports a healthy 2.2% dividend yield. Shares might suffer in the near-term, but with a few changes in the next 22 months, hopefully Wal-Mart will rocket to $55.01 and make this buy-write return almost 30%.

Buy 100 WMT @54.80                    $(5,480)
Sell 1 WMT Jan 13 $55 Call                $505
Sell 1 WMT Jan 13 $55 Put                 $640
Total outlay:                                    $4,335

Potential return: $1,407 including dividends or 32% return on cash invested on a stock that needs to increase <1% in the next 22 mos.

Break-even: 49.18 or 10% below current prices

The secret to suriving for 3 months underground

Apparently the Chilean miners secrety had pot and porn smuggled down to them.

Remember, what happens in the mine, stays in the mine!