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TFC Commodity Trading Forum

Wall Street's Thursday Lunch Options

Chris Tyler, Optionetics.com
February 17, 2011

With a “de-licious” double secured, investors opt for a bit of “de-fense” Thursday on a little something for bulls, bears and hedge hogs. As of 11:15 ET the SP-500 (SPY) is flirting with the unchanged level after doing a little of this and a little of that at slightly lower price levels.

After helping provide “de-lectable” market gains on Wednesday, shares of Deere (DE) and Dell (DELL) are off fractionally in some business-as-unusual profit-taking. As for Thursday’s broader market, the same isn’t as true as bulls are once more attempting to challenge the idea of profit-taking’s very existence.

For the bold and the old, the Philly Fed survey is the session’s top headline pleaser, if not actual market support. Intraday, the survey on regional manufacturing conditions jumped to a surprisingly strong 35.9, marking its highest level in seven years and well-above Street views of 21.0.

For the bears, depending on investors’ mood regarding the subject of deflation vs. inflation, total CPI data for January rose by a slightly hotter 0.4% compared to estimates of 0.3%. Core levels also came in above views with a reading of 0.2%, it’s fastest pace in more than a year’s time and versus forecasts of 0.1%.

Separately, weekly claims rose by 23,000 but filings of 410,000 were largely anticipated by a Street expectant of an increase to 408,000. And January’s Leading Indicators managed to scrape together a 0.1% increase which fell shy of estimates of 0.3% while December’s data was revised lower to reflect a gain of 0.8%.

Elsewhere, there’s a little something (somewhere) for the hedge hogs in the market hanging on every uttered word of today’s BernankeSpeak in front of the Senate Banking Committee--testimony, if we could find it, typically dancing between optimism and caution regarding the economic landscape.

In corporate news, Williams (WMB) delivered a bouquet of treats for investors today after it beat estimates by $0.17 per share, issued upside, albeit wide and loose EPS guidance through 2012, announced a dividend increase and its intentions to break itself up into two separate publicly-traded entities.

Intraday, shares of WMB are up 7.25% and technically extended in hitting fresh intermediate highs above prior up-channel resistance. For their part, option traders have pushed volume up towards 100,000 contracts on the session with efforts concentrated on the call side by a four-to-one margin.

Elsewhere and succumbing to gravity, NASDAQ 100 component, “cloud” outfit and dearly-held growth stock NetApp (NTAP) issued disappointing slightly below-views guidance worthy of angering or at least prompting bulls to take profits.

After beating by two cents in its third quarter on in-line sales growth of 25.3%, the company expects Q4 EPS of $0.49 - $0.53 versus estimates of $0.54 per share and bracketing revenue growth of 15% - 20% on sales of $1.36B - $1.41B compared to forecasts of $1.38B.

Shares are off -8.50% but to put things in perspective, have enjoyed gains of about 500% during the same time the market has managed to achieve its own double from that notorious bottom nearly two years ago.

Of technical interest, shares of Intel (INTC) are enjoying a nice under-the-radar breakout from a nice three week consolidation. The world’s largest semi outfit and a company whose stock has badly-lagged the broader market’s bullish performance in recent months may be finding some strength from rival NVIDIA (NVDA).

NVIDIA announced better-than-expected results and guided higher last night but found more than a few analysts offering caution regarding shares at current levels. Analysts such as Wedbush also cited competitive concerns from the likes of Intel, Qualcomm (QCOM) and TI (TXN) by 2012.

Finally and in those sometimes accurate heat-seeking option markets, shares of AK Steel (AKS) are seeing heavy concentrated activity in the slightly out-of-the money March 18 call with the stock up fractionally at 17.05 on no company-specific reports of notice.

Thus far, more than 41,000 calls on various mostly retail-sized prints have hit the tape compared to existing open interest of about 10,400. The call is currently priced at $0.56 on bid implieds nearing 50%.

In order to secure a sure to be less-talked about “double”, bulls purchasing the call will need shares to rally by 12% come that third Friday in March—which given AKS technical laggardship of the past year, seems a bit easier to handle than in optimistically riding long in the tooth trends elsewhere.

Chris Tyler
Senior Options Writer, former Market Maker & fulltime Option Hedge Hog Advocate
Optionetics.com ~ Your Options Education Site