ONE-TWENTY TWO: Trading Financial Markets
Exploring the poetry in financial markets for students of money and economy since the year 2000.
Three and a half years ago, I concluded that options for Google (GOOG) should be sold, not bought, ahead of earnings. This advice seemed to generally apply ever since as GOOG tended to move just enough after earnings to devalue near-the-money calls AND puts. Friday’s 11% post-earnings pop was a rare, and impressive, exception to … Read more
Adobe Systems, Inc. (ADBE) was punished on Wednesday for an earnings report that produced guidance slightly below analyst expectations. The stock dropped as much as 26% after ADBE guided Q4 earnings to $0.48-0.54 EPS vs. $0.53 analyst consensus and Q4 revenues $950M to $1.0B vs. $1.03B analyst consensus (from briefing.com). The severity of the sell-off … Read more
With tongue reaching for the cheek last week, I declared the market both extremely undervalued and very overvalued, guessing that “as earnings season grinds on, I suspect the near-predictable pattern of post-earnings fades will finally wear thin, giving way to more bullish behavior.” I did not expect the turn to happen so clearly and dramatically … Read more
IMAX sold off almost 10% the day after heavy bullish trading on the stock’s options. This setback proved temporary as IMAX immediately turned around and set fresh 10-year highs on Monday. The chart below shows the recent action: *Chart created using TeleChart: The payoff on the calls has been tremendous so far. The March 15 … Read more
Interpreting the trading volume in options is typically difficult (I did an analysis in three parts last year). But I am most fascinated when a herd of speculators get caught leaning in the very wrong direction. This is what happened with IMAX. Schaeffer’s Research reported on heavy, bullish activity in the trading of IMAX options … Read more