Sunday, July 26, 2009

Trading Apple Call Options thru the Earnings Report

Trading Apple Call Options thru the Earnings ReportSocialTwist Tell-a-Friend

More color on that gigantic SPY put trade on Thursday

More color on that gigantic SPY put trade on ThursdaySocialTwist Tell-a-Friend
Fari Hamzei

I now have more color on that gigantic SPY put trade (720K contracts) executed last Thursday on ISE:

It was a 120K by 240K put backspread rolled from August to December, executed on behalf a major US-based hedge fund;

120k of Aug 92 puts were traded up to Dec 95 puts


240K of Aug 80 puts were traded up to Dec 82 puts;

the transaction was virtually fresh cash-neutral for the fund.

What is a "put backspread" ??

From OXPS education webpages:

Put back spreads are great strategies when you are expecting big downward moves in already volatile stocks. The trade itself involves selling a put at a higher strike and buying a greater number of puts at a lower strike price.

Ideally, this trade will be initiated for a minimal debit or possibly a small credit. This way, if the stock gains ground, you won't suffer much either way. On the other hand, if the stock drops as you hope, the profit potential will be significant because you have more long than short puts. To maximize the potential for this position, many traders use in-the-money options because they have a higher likelihood of finishing in-the-money.


Saturday, July 25, 2009

Barron's The Striking Price Article on Market Volatility

Barron's The Striking Price Article on Market VolatilitySocialTwist Tell-a-Friend
Fari Hamzei was quoted today in Barron's options column by Steven Sears

Thursday, July 23, 2009

Market Timing Commentary as of Thursday, July 23, 2009

Market Timing Commentary as of Thursday, July 23, 2009SocialTwist Tell-a-Friend
Fari Hamzei

Please Note: These charts are from the end of regular trading hours on Thursday, July 23, 2009.

MSFT, AMZN, AXP, COF, BRCM and JNPR all reported after the 4 pm NYC close today and they all missed, some by little, and MSFT & AXP, by not so little. All were taken to the woodshed for some much-neglected discipline. They are down, some heavy, in the after hours trading. We live and trade in a very frothy world, the management teams, were repeatedly reminded.

And for Reg. FD purposes, our Phoenix Traders went long JNPR Aug A-T-M Puts yesterday at about 2pm EDT. And, today at about 212 pm EDT, we doubled that position, very near the market high. After JNPR reported a double digit fall in revenues, a slide in margins and gave a disappointing outlook, I was asked on Twitter, why AAPL long calls on Tuesday and JNPR long puts today? My answer was simple: trading is all about market intel [something you won't find on CNBC]. We both laughed it out loud.

Let's go thru some charts. First my favorite, Sp1-MoMo chart. "Let's get really overbought" was name of the game today. After all, the venerable money manager Bill Miller of Legg Mason, wrote last night "the worst has passed" and "bargains abound in the US stock market" to his Legg Mason Value Trust fund.

NYSE Advance/Decline Line closed +2088 and SP1 back again above +2 sigma with MoMo at +45. Remember, as I mentioned in the last Friday video, posted further below, we could stay here and see these types of high readings both in relative (SP1) and absolute (MoM0) terms for some time. No guarantee we will just fall off the cliff here just because we are overbought. As always, I look for the requisite "catalyst" in geopolitics, Fed, White House, Wall Street, Pentagon, Big Oil, etc etc.

Next is our Wyckoff Chart. Notice we have moved 1,000 DJIA points in 9 trading days (spanning some 4 sigmas). Today, DJIA closed for the first time over 9,000, trading above last Jan 2nd high and came within 200 pts of Nov 4th Election Day price range.

In like fashion, DJ Trans moved some 4.5 sigmas: (Economy going forward will do well -- what commercial real estate problems, consumer credit, forget about it -- Washington will save 'em too -- and please, quit complaining about retail vacancy rates on Miracle Mile). And, RUT (risk-loving is back, its Index Futures at one point were up almost 4% today) and NAZZ Composite (closing higher 13-days in a row) all screamed in unison: Xmas is here early. Yeah, for sure !!

But not our beloved Vols. There were smarter of the bunch, and they stopped dropping in face of rapid ascend rate in the equities. VXN rode down the -2 sigma line, three days in a row last week, and as expected (as in last Friday video), it pulled backup, albeit, very very slowly until today. Both VXO & VXN closed higher today, as smart money started to buy some puts for downside protection. And Market Makers smelled it and adjusted those bid/asks, albeit by rapid-fire algo trades.

One fund rolled UP its SPY August downside protection at 92 strike into December 95 strike, for some 72,000,000 shares of SPY (S&P-500 ETF) it holds. Yes, 720K put contracts on SPY, a "jaw dropper," was one trade today that cleared at the ISE in NYC.

Last but not the least, here is our Timer Chart. With NYSE McClellan Oscillator (MO) at +226 and NAZZ at +144, with CI Indicators lit RED, SPX at +2 sigma, NDX above +2 sigma, we are short-term overbought again. Just look at Up/Down MO for NAZZ, it is almost +210. With Volume, being a coincident indicator, we should brace for a pullback.
Now with MSFT latest report, the TechLand recovery roadmap got a lot fuzzier. And with AXP and COF results showing consumer finances remaining in stress, the retail spending should remain below trend.

Now I said the same thing some eight weeks ago and nothing happened. We simply traded in a range. This time, it may be different. Tomorrow could be for the history books as the spin meisters will try to put a fresh new lipstick on this pit bull.

A Note of Thanks: We are immensely indebted to our learned colleague, Steven Sears, the Editor of The Striking Price Column at Barron's for his valuable & speedy research regarding the SPY trade today.

Sunday, July 19, 2009

Trading Futures during American-style Options Expirations

Trading Futures during American-style Options ExpirationsSocialTwist Tell-a-Friend

Trading Futures during European-style Options Expirations

Trading Futures during European-style Options ExpirationsSocialTwist Tell-a-Friend

Saturday, July 18, 2009

Market Timing Commentary

Market Timing CommentarySocialTwist Tell-a-Friend

Thursday, July 9, 2009

Today we passed the 3,000 Followers mark on Twitter

Today we passed the 3,000 Followers mark on TwitterSocialTwist Tell-a-Friend
Fari Hamzei

As promised back in May, to commemorate this milestone, we are offering 3 of our most popular packages -- at 33% off of our regular prices -- Proprietary Indicators, Phoenix Options Newsletter and Index Futures Chatroom and Streamer, as our Summer Specials.

Sign-up links are posted on Twitter. Just go to to take advantage of this offer (which expires on end of business Friday, July 10th).

Wednesday, July 8, 2009

Market Commentary as of Wednesday, July 8, 2009

Market Commentary as of Wednesday, July 8, 2009SocialTwist Tell-a-Friend
Fari Hamzei

We still stand by our May 22nd intermediate bias change, to the short side, which was again re-iterated on our June 12th blogpost here.

What is clear now is the very short-term over-sold condition we are in. The chance of short-term rebound (a dead cat bounce) has increased as we enter the Q2 Earnings Season.

This is evidenced by our MoMo reading (first chart) of below -30 as denoted by the green horizontal line and VXO trading near +3 sigma today (second chart).

Friday, June 12, 2009

Market Commentary as of Friday, June 12, 2009

Market Commentary as of Friday, June 12, 2009SocialTwist Tell-a-Friend
Fari Hamzei

As you can see in the charts below, starting with the left hand side, the rising S&P-500 Cash Index has been accompanied with lower and lower directional momentum, and thus creating a "bearish divergence" with the SPX.

In the right hand side chart, we show two proprietary modified Breadth (Advance Decline) data subgraphs. The longer term sub-graph (SP1) shows a modified cum A/D line superimposed with its sigma channels. The lower subgraph, MoMo, is a short-term A/D Oscillator. Notice the long-term vs short-term are also in a very pronounced "bearish divergence" pattern.

THIS TECHNICAL ANOMALY WILL NOT LAST FOREVER. It will resolve itself sooner than later. What is currently unknown is that the proper catalyst for the upcoming reversal.

If you are LONG, watch your trades very closely. If you plan to STAY LONG, start looking for some portfolio insurance (O-T-M Index /ETF Puts).

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