Russell’s Round Up – Weekend Review

Barron’s – There were three articles that caught my eye this weekend –

“Revenge of the Emerging Markets” highlights the out performance of the US market, as measured by the S&P 500 index, versus emerging markets over the past seven months. If you believe the emerging markets will catch up with the US market one of the methods to play this would be purchasing the iShares MSCI Emerging Market Index (EEM) exchange traded fund. Being an options guy I immediately checked out the market for options on the EEM and found it to be a pretty active place. A total of nine options series, with short term options and LEAPS with expirations out until 2013 are all pretty liquid markets if you are considering taking the advice from this column and putting on a bullish EEM position. Also, the CBOE has introduced CBOE Equity VIX indexes that indicate the volatility of some individual equity securities. VXEEM is the symbol for the EEM volatility index.

“Texas Instruments Makes a Good Match” discusses the bid to acquire National Semiconductor (NSM) by Texas Instruments (TXN). In summary, analysts feel TXN could trade to about 42.00, up from around 35.00 based on 2012 earnings. Again, being an option guy I took a look at available options. TXN has LEAPS going out until January 2013 that may be worth a look as an alternative to outright purchase of TXN shares.

Finally, The Striking Price column focuses on gold. Specifically the Select Sector Gold SPDR (GLD) exchange traded fund which is trading at 142.05 a share. A strategy recommended by the derivatives strategist at MKM Partners is worth taking a look at. It involves buying an out of the money GLD call and selling an out of the money GLD put to help pay for the call option. A trader would be obligated to purchase shares at the strike price of the out-of-the-money (naked) put. If the GLD rallies a trader has the right to purchase shares at a price higher than current levels, but possibly a price lower than where the GLD trades up to. two pages after the options column, the commodities column is actually bearish on silver. Again there’s an ETF available to trade based on the price of silver, the iShares Silver Trust (SLV) trades based on the price of silver and (of course) there are options available on the SLV.

Options Action –

Friday evening’s episode on CNBC started out with a bearish recommendation into earnings for JP Morgan stock with the company reporting on Wednesday.

Another recommendation focused on natural gas, which has been under pressure, with the feeling that the price is bottoming out. The specific stock is Chesapeake Energy (CHK) and the recommendation is to purchase a July call option to benefit from a rally in the stock over the next three months. 

Active Trader –

I received my monthly issue this past weekend and noted there was an article on stock splits. As a reminder, Citigroup is due to enact a reverse split early next month. Back up a few blogs to see a good explanation by Dan Passarelli (and read the comment by Marty Kearney) from last week.

Earnings Season –

Today begins the earnings season with Alcoa (AA) releasing their earnings. Note what the stock reaction is to the earnings release as it is usually a good indication of how the market fares during earnings season.