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Gotta Love the Fizzy Water and SodaStream (SODA)?! Options?? By: Tim Bolger

SodaStream International (SODA): the manufacturer, developer, and marketer of state of the art carbonated beverage making machines is taking the stage on Optionshoney.com. I have been doing rigorous fundamental research on this Israeli company and closely watching the stock trade for the past 3 months. I became very interested in this beverage company based on its unique technology and the fact that I had heard great product reviews from a few friends who owned this carbonated beverage making machine. Just a few days ago, I jumped on the SODA bandwagon and purchased my own SODA machine to carbonate water at the homestead. It’s so much fun and makes yummy bubbly carbonated water in just a few seconds.  It’s really awesome!! Then you just have to add your favorite syrup flavor and vodka if you so please and shizam you’ve got a killer cocktail or non-alcoholic beverage.  Will SodaStream be the next huge beverage machine growth story for investors, just like the Keurig and K-Cup were for Green Mountain Coffee Roasters (GMCR) Investors?!  I hope so and think it is very possible for this company to double or triple in market cap value and feel that this company is still in early global growth stages.

SodaStream is also super environmentally friendly and eliminates the need for recycling hundreds of millions of plastic soda water bottles every year…Now that rocks! The more people around the globe that fall in love with this beverage company’s cool products and fizz their own water at home, the cleaner this planet will be in the future. And, it truly makes yummy carbonated water in just a few seconds!! Sodawater and a squeezed lemon or orange is not only quick to make, but it’s super refreshing…

For all the SODA Bulls, let’s hope this stock is preparing to take off like a rocket ship. It has experienced some headwinds over the past few months and the stock has declined quite significantly. I think this is short term pullback in the stock and the longer term fundamentals remain intact for this beverage machine’s growth story…but only time will tell.  It  is heavily shorted and any good news could create a huge short covering and big pop in the stock!  I usually like to buy slightly beaten down stocks when they are presenting value opportunities and not trading at their 52 week highs. I’m ready to dive in to Sodastream options.

What is the Options play on SodaStream (SODA)?!

1. Soda Stream $89

Trade#1: I am considering selling the SodaStream (SODA) $32.50 strike Put Options with an April 20, 2012 expiration for $1.75 a contract. Attached is the SODA April 20, 2012 expiration Options chains courtesy of Yahoo Finance: http://finance.yahoo.com/q/op?s=SODA+Options. I need the stock to fall a few more percent, in order to sell these options for $1.75 a contract. If I sell 10 contracts for $175 a contract ($1.75 x 100 shares per contract=$175), I will credit $1,750 into my brokerage account minus trading fees. Remember, that by selling the Put Options, I am taking the risk of getting exercised on the shares at $32.50 per share, if the stock is trading below $32.50 on the expiration date of the derivative contracts. Therefore, to execute this trade, I will need $32,500 in cash in my brokerage account as collateral in case I get exercised and have to purchase 1,000 shares of the stock at $32.50 (10 contracts x 100 shares per contract=1,000 shares x $32.50 per share= $32,500 plus trading fees to buy the stock). I like this trade and am very comfortable in a worst case scenario of going long a 1,000 shares of the stock at $32.50. My 12 month price target on this stock is $60-70 per share. Selling the 10 Put Option contracts will finance $1,750 minus fees towards my potential purchase of the shares of stock at $32.50 as well and that is awesome.

Trade#2:  I would consider buying the SODA $32.50 strike Call Options with an October 19, 2012 expiration date for $4.25 a contract. Attached is the SODA Options chains with an October 19, 2012 expiration date courtesy of YahooFinance: http://finance.yahoo.com/q/op?s=SODA&m=2012-10. I need SODA shares to decline another 5-6% in order for me to buy these contracts for my desired price. Currently, the Ask (the price a seller is willing to sell the contracts for) is $6.60 a contract for these Call Options.  If I buy 10 contracts for $4.25, I will get long exposure to 1,000 shares of SODA at $32.50 per share. 10 Options contracts will cost me $4,250 plus trading fees. If shares of SODA trade to $50 before the October 2012 expiration date, these 10 contracts will be worth at least $17,500 and I will profit over $13,000 on the trade. Show me the Honey…I mean $$$. Let’s go SODA Bulls and remember Options trading is very risky. More conservative investors should avoid trading Options and just consider buying shares of SODA stock at $32 or less. Please remember to consult your investment advisor before buying and/or selling Equity Securities/Options. Stay tuned for more Options action at http://www.Optionshoney.com.

Check out the Technical chart on shares of SODA below courtesy of FinViz.com:

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Tech Giant Oracle Has Big Quarterly Numbers and Stock Slides!! What are my Options?! By: Tim Bolger

German Sailing Grand Prix Kiel 2006. Team: BMW...

German Sailing Grand Prix Kiel 2006. Team: BMW Oracle Racing. (Photo credit: Wikipedia)

Oracle Corporation (ORCL): the business software and hardware global giant is sliding over 2% to $29.48(3:19 PM EDT) after it beat the streets quarterly earnings expectations after the closing bell on March 20, 2012 (Q3 results ending Feb 29th).

In morning trade, Orcl stock popped to an intraday high of $31.15 a share and then reversed course to the downside breaking the important technical of $30 a share. Nearly 80,000,000 shares have traded hands on this tech giant before 3:26 PM EDT on a day of huge volume, in which investors/analysts have a mixed sentiment on the financial results of the company. Oracle beat analyst expectations by a slight percentage, coming in with $9.04 Billion in revenue for the quarter.  The street had Oracle coming in with an estimated $9.02 Billion, which is only a small beat and may partially explain why the shares are sliding after a quick knee jerk pop to the upside this morning.

On a more positive note, Oracle had a very impressive gross margin of 78.9% and an operating margin of 37.8%. Non-GAAP earnings beat the street by 6 cents, coming in at $0.62 cents a share and the street had predicted Oracle to come in at $0.56 cents a share. Check out the chart below courtesy of Capital IQ to take a closer look at the Non-GAAP earnings results in more detail:

anImage

Source: S&P Capital IQ. Quarterly periods. Non-GAAP figures may vary to maintain comparability with estimates.

Despite the slide in Oracle shares today, I am still a raging bull when it comes to investing in this global technology giant. Larry Ellison is one of the smartest and richest Tech moguls on planet earth and I am very confident in the long term picture of continued profitability and share appreciation of this Bay Area Tech giant. I am maintaining my $37 price target for Orcl shares over the next 11 months and would be a buyer of the shares on this pullback.  I think this is short term storm for and pullback in Orcl shares and presents a great long term buying opportunity for new investors and those looking to accumulate more shares for their core positions. A great entry point in the stock will be at a share price of $27.50 or less. Now, what is the Option play?! I like the longer term Call options and selling the near term Put options on Oracle.

Trade#1: I would consider selling the Oracle(ORCL) $29 strike Put Option for $0.90 cents a contract with an April 20, 2012 expiration date. Attached is Oracle Options Chains with an April 20, 2012 expiration date courtesy of YahooFinance: http://finance.yahoo.com/q/op?s=ORCL&m=2012-04. If I sell 20 Orcl Put Options for $0.90 cents each, I will credit $1,800 into my brokerage account ($0.90 cents x 100 shares per contract=$90 and $90 x 20 contracts =$1,800).

Remember, by selling the Put options, we are taking the big risk of potentially being exercised on the shares of Oracle at $29, if shares of Orcl stock are trading below $29 on the expiration date of these contracts.  Therefore, we need to have $58,000 in cash in our brokerage account as cash collateral in the event that we get exercised on the 20 Put option contracts that we are considering selling. 20 contractsx$2,900($29 x 100 shares per contract)=$58,000. This is definitely not a trade for beginners, especially if you do not have the cash reserves to initiate the trade. However, I am a fan of this trade and a big long term bull on Oracle. In a worst case scenario, I am comfortable going long 2,000 shares of Oracle at $29 a share if I get exercised. By selling the Put options, I am in a sense financing $1,800 towards the potential eventual purchase of 2,000 shares of Oracle at $29 per share. By selling the Put Options, I am actually getting long the stock at $28.10 (net cost of $58,000-$1,800 credit=$56,200)because of the $1,800 that was initially credited to my brokerage account at the opening of this derivatives transaction.

Trade #2: I would consider buying the Oracle(Orcl) $29 strike Call Options with a Sept 21, 2012 expiration date for $1.25 a contract. Attached is the Orcl Options Chains with a Sept 21, 2012 expiration date courtesy of Yahoo Finance: http://finance.yahoo.com/q/op?s=ORCL&m=2012-09. I can buy 20 contracts for $2,500($125 per contract of 100 shares x20 contracts= $2,500 to open this trade) and that will give me long exposure on 2,000 shares of Orcl stock at $29 a share for the next several months. If the stock trades to $35 by the September expiration date, my initial $2,500 investment will be worth over $12,000. That would be beautiful return on our capital and I think that Tech stocks continue to lead this market rally higher in 2012!!! Lets go Orcl Bulls!! Remember, we need Orcl stock to decline another  5 or 6% in order for us to get an opportunity to buy these September 2012 Call Options for $1.25 a contract. Options take alot of patience and discipline to be successful in making money. Please remember to consult your investment advisor before buying or selling any equity securities/stock options. Good luck and stay tuned for more big action at http://www.Optionshoney.com.

Diamond Foods Spiking 6% After Big Sell Off Yesterday!! Call Options?! By: Tim Bolger

Just a quick note on Diamond Foods(DMND). I posted an article yesterday: http://optionshoney.com/2012/02/09/big-shake-up-at-diamond-foods-this-is-totally-nutz-ceo-and-cfo-are-out-options-honey/recommending that investors buy shares of the San Francisco snack food maker on a huge 42% decline in the shares. DMND is up close to 6% today, on a day in the red across all the major U.S. stock indexes.  Additionally, I suggested buying the Call Options on DMND to take advantage of yesterday’s tremendous share weakness.  I bought the Feb 17, 2012 $23 strike Call Options for $1.45 yesterday and hope that a few other traders jumped on that train. Well, I know alot of Wall St. Pros are all over this big trade and yesterday was a record volume day for Options traded on DMND foods, but I hope a few Optionshoney lovers are making money on this trade as well. Forbes reports: Plunge In Diamond Foods Yields Feast Of Options Trades at Forbes(Fri 10:07AM EST). Consider locking in profits today as these DMND Options contracts are trading 61% higher over night:http://finance.yahoo.com/q?s=DMND120218C00023000. Always remember that pigs get slaughtered…no need to be greedy and it’s a very smart move to take 60% of our profits off the table on this rally in DMND shares and the Call Options…But, this stock may run to 28 by the Feb 17th expiration next week and we could still see huge upside in the value of these Call Options contracts. Options are risky financial instruments and please consult your investment advisor before buying any Options contracts or stocks that I research/trade on this site.  Stay tuned for more action at Optionshoney.com.

Check out the 2 day chart on DMND courtesy of Fidelity Investments:

Chart

Big Shake-up at Diamond Foods…This is Totally Nutz!!! CEO and CFO are Out?!. Options Honey?! By: Tim Bolger

Shares of San Francisco based snack food maker Diamond Foods(DMND) tanked over 42% on huge volume this morning after the company announced yesterday evening that they would have to restate there 2010-2011 financial statements following the negative results of a 3 month Audit investigation that was not favorable for DMND shareholders in the short term… The audit was conducted because of an alleged accounting scandal over the momentum payment from DMND to its Walnut growers.. To put the icing on the cake, the CEO and CFO are being removed from the company.  Definitely not a fun day for those long the stock…However, I still love Diamond Foods Wasabi Almonds and the rest of their yummy products. So, I bought shares of the stock on all of this bad news today.  Consumers will continue to gobble up there tasty nuts around the globe for sure and this is a short term thunderstorm for the company that provides a great opportunity to buy the shares at a deep discount….

So what is the Options play?!  Diamond Foods: http://www.diamondfoods.com. Check out this article written by the Wall St. Journal today on Diamond Foods. The WSJ reports a record trading volume day in Put and Call Options on Diamond Foods Inc.: http://blogs.wsj.com/marketbeat/2012/02/09/taking-a-bullish-flyer-on-diamond-foods/?mod=yahoo_hs.

WSJ Reports: Diamond Food CFO’s To-Dos: Restate, Then Rebuild…

 http://blogs.wsj.com/cfo/2012/02/09/diamond-food-cfos-to-dos-restate-then-rebuild/?mod=yahoo_hs

I purchased the Feb 17, 2012 $23 strike Call Options on DMND today for $1.45 a contract and would be a buyer of the longer term Call Options as well. Attached is the Options Chains for the DMND June 15, 2012 Put/Call Options courtesy of Yahoo Finance:  http://finance.yahoo.com/q/op?s=DMND&m=2012-06. I would be a buyer of the DMND $22.50 strike Call Options for $3.40.  I am also a buyer of the stock under $23  a share and believe it is a great long term investment.  I love San Francisco and love this SF Nut Company!!! The Pringles acquisition may not happen now because of this terrible news today…however, I would personally prefer the company not to purchase Pringles from Procter and Gamble and feel that DMND is paying way too large a premium for this brand name chip franchise. Reuters reports:Procter & Gamble likely to terminate Pringles deal with Diamond Foods, NYT saystheflyonthewall.com (Thu 11:47AM EST).  Stay tuned to Optionshoney.com for more Options plays… 🙂

Check out the ten day chart of DMND courtesy of Fidelity Investments:

Chart

Why Options and where is my honey at!?

Well, for starters the options universe is gigantic and just like I love honey, I love to make that money…Options are exciting and extremely fast paced!! They provide alot more leverage and often require less money upfront than purchasing a physical commodity or stock.  Every time I make a trade, I learn more about a company and I learn more about the world…With an undergraduate degree in Political Science from Grinnell College and a passion for investments (CFA candidate), I love to do rigorous fundamental research on the financial statements of individual companies, mining for companies that are both undervalued or over valued in a particular sector, and I am fascinated by the complex nature of the global capital markets.   I am what you call an economic news junkie/trader and get high off of “options” and the potential to make lots of money when the stars are aligned perfectly…A good options trade is carefully designed and executed at the precise moment to maximize potential profits and minimize downside risks. As you will learn, Rome was not built in a day and neither was a great options trader.

But, to give a brief history of why I became so interested in options, let’s go back in time to 2007 when i first began researching and trading equity securities from my condo at the Palms San Francisco.

After setting historic stock market highs in the Fall of 2007 and a near peak in the U.S. housing market, the global equity markets started to head lower and a number of my long stock positions greatly declined in value.   This was a perfect opportunity to get short the market(particularly high beta technology stocks and financials) and the perfect storm for long only investors was brewing around the world.  Put stock options would have saved me tens of thousands in paper losses in the month of October.  I learned how the bears can eat your money for lunch!! And I am not talking about the Chicago Bears…But, just like riding a bike, we need to learn from our mistakes and knowledge is power…markets always go higher over the long run and timing is everything in the short term.  As I will teach you, timing is extremely important when we are trading option contracts.

In 2008, the housing crisis worsened, market volatility increased, and mortgage lenders started to collapse like dominos…Bye bye New Century, Argent Mortgage, Option One and the list is a mile long. It was in the summer of 2008 that I met a professional options trader who has become a close friend over the past few years. This friend would open my eyes up to the exciting and dangerous world of options!!! Options are all about being quick on your feet and not usually recommended for the passive or conservative investor.  However, leap options can be used by passive investors with a 1 to 2 year outlook on the rise or fall of an asset.

Options are contracts on equity securities, commodities, interest rates, currencies, etc.  Options can be used to manage risk in an investment portfolio, speculate on the rise or fall of an asset, etc. A typical option contract can be converted into 100 shares long or short an asset.  Options provide protection from Black Swan events(i.e lehman bankruptcy of Sept 2008 and housing meltdown), which we will discuss in more detail later on…

–Timmy B

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