As I sit in my home office looking at the empty little league field
across the street all I can think is the VIX has nothing on Chicago
weather. 85 to 40 in two days, really?
Options Action –
Before getting into individual option trade recommendations, the
panel reviewed market activity and cited many bearish tendencies they
saw in the market this past week. Bearish activity in leading market
stocks such as Goldman Sachs, Microsoft, and Disney were cited as an
indication of bearishness. Also, it was noted a vast majority of
option activity on Friday in broad based exchange traded funds
involved buying puts.
The first stock specific commentary was on Amazon (AMZN). The stock
is up about $40 to just over $200 in the past few weeks and the call
is bearish. Do keep in mind, and this was admitted by the panel, this
is not the first time the traders have stepped in front of AMZN with a
bearish call. Those past outlooks have not gone too well. The
recommendation is for a (an out-of-the-money bearish call) vertical spread that has limited risk along
with limited reward. As this trade does involve stepping in front of
a pretty strong up trend, a trade with limited risk makes complete
The second call was on Home Depot (HD) and involves a trade in front
of the company’s earnings report this week. The group recommends
buying a straddle into the earnings report this week as they feel the
options are under pricing the potential stock price move that will
occur after their report. Based on Friday pricing, the options are
showing a possible 3.2% move or about 1.20 higher or lower after earnings have
Finally, Shire Pharmaceutical (SHPGY) was noted for an abundance of
bullish option activity last week.
Barron’s was pretty light on the stock side this week with the cover
highlighting the abundance of potential candidates vying for the
Republican nomination for president.
A bullish outlook for Juniper Networks (JNPR) was discussed with a
price target of around 50.00 over the next twelve months. Juniper closed near 40.00 on Friday. If you read the outlook and consider buying shares, also take a look at the LEAPS that expire in
January 2012 or January 2013.