Weekend Review – 12/15/2013

Options Action

On Options Action it was noted that stocks with strong momentum outperformed last week.  This led to a recommendation on Tesla (TSLA – 147.65) which it was suggested is hitting against resistance around 150.00.  This was a price level it was not able to stay above on Friday.  With a short term bearish outlook it was suggested to purchase a put option that expires on December 27th, which is a non-standard expiration date.   The pricing was from when TSLA was over 151.00 Friday morning and the idea was to buy a TSLA Dec 27th 150 Put for 5.50.  It was also suggested that if TSLA trades much lower selling a lower strike put to improve the profitability.

Two other trades were recommended as well.   One trade was based on a bearish outlook on the Consumer Staples sector and conveniently used the Consumer Staples Select Sector SPDR (XLP – 42.27).   The trade is a very straightforward long XLP March 41 Put at 0.80.  Also, there was a bearish recommendation for the semiconductor company Micron Technology (MU – 23.08).  It was noted that options on MU are fairly expensive so the trade was a bear call spread selling a MU Jan 24 Call and buying a MU Jan 25 Call for a net credit of 0.30.

Barron’s

The Striking Price column started out with a recap of a bullish article from June on Interactive Brokers (IBKR – 24.49) which has turned out to be a pretty good forecast as the stock is up about 50% since then.  Selling a IBKR Jun 24 Put at 1.35 which gives you the obligation to buy shares six months down the road.  There was also a suggestion that with a bullish global economic outlook you may consider selling puts on General Electric (GE – 26.84) to possibly buy shares on a dip.  The specific idea here was selling GE Jan 26 Puts at 0.45.