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I will be blunt when I say this - the city of Atlanta no longer deserves an NHL team. It is the second time the city had an NHL team, but ultimately lost it due to financial hardship. This is not to disrespect the few NHL fans living in Atlanta, but even you must admit your city can not support an NHL team.
In life, you'd be lucky to find a boss willing to give you a second chance after you've screwed up, and luckier to find a girlfriend willing to forgive you on your first mistake. And for the city of Atlanta known more for its Braves, there's no three-strike rule here. The city's inability to attract fans and more importantly, revenue and profitability, for a second time is proof that the hockey market in southern USA is very small and limited.
Success also breeds interest and a lack of success by the Thrashers does not attract the casual fan. Once Kovalchuk was traded, what's left to watch? The team was essentially a stopping point for many teams in the southwest, a way to practice and get their kinks out. I only remember this franchise making the playoffs once, and it ended in the first round. Now, let's see if Winnipeg owners can do something about their mediocrity and make them a half-decent team.
I feel bad for the hockey fans that do exist in Atlanta, as they have lost a team twice now. Moving a team is always the last thing a league wants to do because it uproots families and players, and adds uncertainty into a league. The expectations that the NHL will revert back to a 20-something-team league is definitely a possibility as many markets in the sunbelt are showing signs of thinning margins and there are fewer cities in Canada and the United States that can support a team than teams losing money.
Anyways, without getting too off topic, Winnipeg has been given a second chance by the NHL, well, as we wait for the vote next week, which will almost certainly pass. The city is the smallest market in the league, with just 750,000 citizens. It also has the smallest arena by capacity and television deals and season ticket sales are unconfirmed numbers at this point. The city must support their team financially and emotionally, or else this should also be the final time Winnipeg gets an NHL team. Fair is fair.
Short-term buy signals have been triggered on some major copper stocks over the past few days, including Teck Resources [TCK.B:TSE] and Freeport-McMoran [FCX:NYSE], with an anticipated crossing on the DMI and MACD for BHP Billiton [BHP:NYSE] within the next few hours.
Teck Resources A Canadian play on copper would have to be TCK.B. Shares of Teck Resources had a buy signal on the MACD about one week ago, indicating the massive correction was coming to an end. Today, the DMI has had a positive crossing, suggesting an upward move to the top of the Bollinger Bands could be expected.
Freeport-McMoran Shares of FCX had two buy signals occurring on the same day, just three days ago on May 24. The stock has moved from $49 to $51.77 since that confirmed opportunity.
BHP Billiton The stock has already had a $5 move since copper hit $4 last week, but a buy signal is emerging on both the DMI and MACD. Its signals have not yet fully developed, but based on the moves on other major copper stocks, a trade on BHP with a call option, an uncovered put option, or an outright buy today would be an anticipative play, considering it has already moved 5 per cent in a week. Another consideration is that today's price action has moved the stock above the downtrend and the 20-day moving average - bullish notes.
Disclaimer: I do not own any of the equities mentioned in the article nor any derivatives of the underlying names. I do have a household position on Teck Resources and will most likely be trading the above-mentioned names in the next 72 business hours.
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The CBOE Market Volatility Index [VIX:INDX], also known as the VIX, is a market tool to calculate risk and volatility in the market. Unlike regular equity options, VIX options expire 30 days before the following month's regular options expiry. This typically means the VIX and many other index options that follow this rule expire on a Wednesday. The VIX is an AM settled product, which means the index value is calculated using the opening price on Wednesday. Therefore, all positions must be entered before the close of Tuesday.
The VIX is roughly valued at 18.40. The VIX has not had substantial volatility in the past few weeks, with exception to a large spike in March. Consider writing out-of-the-money call or put options. There is still substantial value for one day. The 20 strike, about 1.60 out-of-the-money, still holds 20 cents per contract. The 21 strike is currently bidding 10 cents.
VIX options may require larger account equity. Index options are settled by cash, not by an underlying asset, like a stock. However, one major advantage with index options are the low margin requirements. 20 contracts will require no more than $3,000 margin, but writing 20 contracts on a similarly priced stock would require as much as four times the margin. This does not mean firms deem index options less risky, it's just that the requirement for trading is smaller, so ensure you fully understand the potential consequences of larger contract sizes.
Disclaimer: Writing uncovered (or naked) options requires substantial margin and is only available to sophisticated traders. Uncovered calls have unlimited risk and can have infinite losses. Before making any trade, always discuss this with your advisor or professional broker.
Shares of Yahoo! [YHOO:NDQ] have taken a turn for the worse as controversy lingers in regards to a transfer of payment from Alibaba. The stock has plummeted from just under $19 to about $16.25 currently in a week. The stock is now trading near a medium-term support at $16. The massive support has held at least five times prior, with a few minor dips into the $15.xx trading range only to be pushed back up above (see chart below).
Chart courtesy BigCharts.com
There are two ways one can play this trade. Personally, I would rather look at writing the put options. The May21 put option at a strike of $16 (this is the regular monthly option as well), are bidding about 22 cents. The premium received represents 1.35 per cent income against the value of the stock and protection on a drop of 2.89 per cent or less.
Another trade consideration would be to buy the call. I normally buy at- or in-the-money options, never out-of-the-money. The current time value on the options for May is relatively small against the volatility of the stock. Expect to pay 20 cents of time value for the remaining four and a half days on the May $16 calls. The current price is 47 cents.
Based on the chart patterns, if the stock were to drop below $16 by Friday, consider taking assignment and wait for the stock to push back above $16. However, any change in fundamentals related to the Alibaba payment could create volatility downwards (or hopefully upwards).
Note, normally I take a position and then post it on my blog, however, due to my uncertainty on the outcome, I have no position at the moment. The technical pattern looks promising, but due to the underlying issue with Alibaba, I have decided to wait a few more days.
Disclaimer: Writing uncovered (or naked) options requires substantial margin and is only available to sophisticated traders. Uncovered calls have unlimited risk and can have infinite losses. Before making any trade, always discuss this with your advisor or professional broker.
Have you had enough of hearing about Las Vegas Sands [LVS:NYSE] nearly every week? Well, hopefully not, since every post here has shown to be profitable.
I took a short straddle position on Las Vegas Sands just now with the 44 strike price. As usual, they are the weekly options, thus, they expire on May 13, which is two days and a half away. The current option premiums available by writing both the call and put at the same time nets out to just over $1.00. I got $1.11 with a fortuitous spike up and down, but you should be able to gather a premium of about $1.03.
The current stock price is about $44.12. $1.03 represents a 2.33% payout for the rest of the week. Your break even range is roughly $42.97 to $45.03 (again, it varies on the total premium received).
The margin requirement is surprisingly small, roughly $1,300 per pair of legs, which earns you over $100. That's a very efficient use of margin. Again, the stock is quite volatile, so for those who want a more conservative approach, writing a short combination using the 45 call and 43 put will also be very reasonable. The net premiums received on these pair of legs will net you roughly 45 cents, giving you a break even range of $42.55 to $45.45.
Disclaimer: Writing uncovered (or naked) options requires substantial margin and is only available to sophisticated traders. Uncovered calls have unlimited risk and can have infinite losses. Before making any trade, always discuss this with your advisor or professional broker.
Since the week has started, I've had two friends ask me about Citigroup [C:NYSE]. On Monday, my one friend thought his shares had skyrocketed ten times over the weekend, while the other, today, asked me if I had purchased any. For the record, I did own Citigroup, but sold the shares above $5 in the spring of 2010, but I digress. The move from $4 last week to $40 this week did not represent a significant rise in the company, but a reverse-split that was announced back in late March or early April. Understanding the reverse-split process is often confusing, so I am going to attempt to explain it in the simplest way possible.
A reverse split, not uncommon, is a process in which the shares of a company are moved up a factor of n with the amount of shares decreased by the same factor. In this case, Citigroup did a 10-for-1 reverse split; 1,000 shares at $4 on Friday would be show in one's account as 100 shares at $40. Note that the equity of the shares still remains at $4,000.
What does a reverse split normally entail? Many believe a reverse split could be treated as a sign that the management team lacks confidence in the share price. Stocks trading below $5 normally have a stigma associated with them, even if the company is worth billions of dollars. Companies like to have stock prices trading between $20 and $50. If the company believes the shares won't move back into that eye-catching price, they will do a reverse split.
Historically, reverse splits have not boasted well for stocks in the short term. Because of the above factor, a short-term sell off often follows, as we have already seen on the shares of Citigroup. Conversely, announcements of a stock split (where the shares are reduced by a factor and the shares are increased by the same) prove to be good ways to attract new investors into the mix and push up the price. This is because investors like to buy in board lots. If a stock is too expensive, investors are reluctant on buying 23 shares of a stock. A split would lower the cost of a board lot.
Another possible, but very unlikely, reason for the sell-off is a misunderstanding of the value of the company. People might think they have made a significant return and will sell all their shares, oblivious they own fewer shares. In reality, most brokers will have a prompt indicating they do not own 1,000 shares, unless the investor just clicked sell in their account without looking at the share count. As well, most brokers, leading up to the pay date of the new shares will have messages and notices about the reverse split. I know I did, even though I don't own the shares, so this theory is not entirely practical in today's computer world.
Option traders holding contracts should also be cautious when entering orders in. The old option chains will probably remain the same, but the new option chains might have an indicator of a stock reorganization. Although most option traders are sophisticated enough to know what the contract is, it is always safer to ensure the options are the correct strike and have the same delivery expectations.
If you are trying to sell your shares today, for unrelated purposes, check to see if the new shares are in your account. You should see a journal entry that shows a disposal of 10n shares and a purchase of n shares at the new price. If this has not happened, you may not be able to sell them because the shares in your account are not the proper Citigroup shares; they will have a different stock identification number. Again, just call your broker if you have concerns. All this should clear up by the end of the week.
A third increase to silver margin requirements in just eight days has triggered another sell off on the commodity. After failing to break above $50 a contract last week, silver has plunged to the $42 neighbourhood. Stocks and ETFs that track silver have started to break below the line of uptrend.
The iShares Silver Trust [SLV:NYSE], the world's largest silver-backed ETF, today, broke through below the uptrend on the logarithmic chart. As well, on the linear chart, the ETF closed right at the support level. Volume on SLV has increased substantially since peaking at $48.52, some days trading at three times normal volume. More than 200 million shares exchanged hands today, almost 9 times more than the 200-day average of under 29 million.
Increased volume can be used as a confirmation of a signal, validating that trader and investor mood's have changed. In this case, massive volume on down days suggests that buyers of silver and silver trusts have decided it was time to take profits, as the risk to reward ratio no longer favours longs.
Other technical patterns also indicate the rally is over, at least temporarily. The MACD and its Divergence moved into negative territory. The DMI has converged, a tool that is used to measure the directional movement of an asset. The positive DMI might possibly fall below the negative DMI tomorrow, a bearish sign. Its ADX has also peaked and is reversing as well.
Another telltale sign was that silver stocks had not participated in a rally. When the stocks of companies that mine or sell silver do not move up with their product, it is often a sign that the underlying commodity is mispriced for the short-term. Investors did not believe silver was worth $50 and would not push up the value of their stocks. This also holds true when an asset, such as silver plummets to serious lows, but silver stocks do not fall.
So, where is silver headed? Many bold predictions have been flaunted in the market. Some say $35 by June, others say $100 by December 2011. They could all be right or they could all be wrong. The only thing that is for certain is that silver is now at an impasse and a move in any direction will be chased by many. Expect massive volatility for the next few sessions.
