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TFC Commodity Trading Forum

Wall Street's Thursday Lunch Options

Chris Tyler, Optionetics.com
January 20, 2011

Sky high prices and a “cloudier” forecast from F5 Networks help extend broad-based profit-taking for a second straight session. As of 11:10 the SP-500 (SPY) is off -0.70% as technical-based resolutions to make 2011 a good one remain in the passenger’s seat during some southbound travel.

Internet traffic / cloud play F5 Networks (FFIV) issued a cloudy outlook last night good for sending shares plummeting more than -22% intraday and confirming “FADSCAN” become very unfashionable ultra-fast.

Today’s move in FFIV shares has in effect wiped out virtually all of its atmospheric rally of more than 45% since its last report which vaulted shares to fresh all-time-highs and served as the rallying point for the last three months and change.

In sympathy, NetApp (NTAP), FADSCAN constituent Salesforce.com (CRM), VMware (VMW), Riverbed Tech (RVBD), Aruba Networks (ARUN) and Rackspace (RAX) are off -4.00 to -11.00% intraday.

By the numbers for F5 and one of investors’ favorite growth stocks which includes the No. 4 spot in the IBD 50 and one of the Mad Money’s FADSCAN component stocks; the company saw a five cent profit beat of $0.88 and up 69% from the year ago period. Sales jumped by 40.7% in the current quarter but a figure of $268.9M fell just shy of Street views of $270.6M as October presented some problems with deals not closing.

Today’s investor scorn however deals largely with F5’s reduced Q2 outlook. Management now sees as producing bracketing earnings of $0.84 - $0.86 per share versus estimates of $0.85 and slightly below views sales growth of 35% on a forecasted range of $275M - $280M compared to $281M.

In other corporate news and attempting to keep a long overdue correction looking constructive is Morgan Stanley (MS). Following near-uniform disappointing results and the wrath of dragging share prices, bulls are attempting to hoist the Anchor Bankers (XLF) back onboard after the company pleasantly surprised with its better-than-expected results.

For its fourth quarter, Morgan Stanley managed an $0.08 profit beat on earnings of $0.43 and representing an increase of more than 205% above the prior year’s $0.14 per share. On the heels of many of its influential peers coming up with lighter-than-expected sales figures (GS, WFC, NTRS, USB), the banker, much to the relief of bulls, also saw revenues climb by 15% to $7.8B compared to Street estimates of $7.35B.

In sympathy, Dow component JP Morgan Chase (JPM) is up a similar sized 1.50%, while Wells Fargo (WFC) and BofA (BAC) are flat and demonstrating relative strength compared to the broader market’s second helping of still mild profit-taking.

Elsewhere and in those often intertwined markets of influence or notice at least, shares of the SPDR Gold Trust ETF (GLD) are off -1.50% after gapping bearishly lower. The price action confirms a flag-like consolidation which found resistance below its 50SMA and a very powerful-looking triple top sporting oscillator divergence and strong signs of distribution within the pattern.

Finally, one auction going well in large cap tech is eBay (EBAY). The internet “sell-it-yourself” goliath posted a five cent profit beat on earnings of $0.52 per share and saw in-line sales growth of 5.2%. Looking forward and largely assisting in today’s “Sold at $30.35!” and up 4.30% climber, eBay issued upside profit guidance of $1.90 - $1.96 per share versus forecasts of $1.85 and above-views revenue range of $10.3 - $10.6B for its FY11.

In those sometimes accurate heat-seeking option markets, a described and cautioned hot and heavy “delta’ed” January 30 straddle action has provided sellers with a very nice flip today. From $1.80 per spread and implieds centered at 100%, yesterdays overly-aggressive bidders are taking little comfort with Thursday’s auction price of $0.60 per spread and 44% IV.

Chris Tyler
Senior Staff Writer & Options Strategist
Optionetics.com ~ Your Options Education Site