Monthly Archives: January 2013

Optionity Core-20 Options Portfolio 01/31/2013

Optionity Core-20 Options Portfolio (Credit Put Strategy)

Stock criteria:

  • Large Cap with low beta
  • Fair/Under-valued
  • Consistent, strong earnings
  • Dividend distribution
  • High liquidity, large volume
  • Good/strong economic moat

This options portfolio consists of 20 core stocks. The portfolio will employee mainly the credit put strategy with the primary objective of generating consistent cash flow. The portfolio focuses on 1) sufficient sector diversification 2) risk/reward ratio control 3) margin of safety by leveraging options.

Daily portfolio performance will be updated at Seeking Alpha Instablog and Optionity.com.

Transaction details will be updated whenever new position is opened or the existing position is closed/expired/adjusted.

Pending transaction(s) to be setup:

Credit short put GE May 20, 2013 $20/$21 put

Optionity Quick Report 01/31/2013

Company Name / Ticker Closing Price (Gain/Loss) Low-High Volume/30 Day Average
Intel (INTC) 21.04 (-0.33) 21.02 – 21.32 36.52M/51.49M
SPDR S&P 500 ETF (SPY) 149.70 (-0.38) 149.60 – 150.37 25.06M
iPath S&P 500 VIX Short Term Futures (VXX) 24.40 (+0.13) 23.82 – 24.60 6.01M

INTC

INTC opened lower and closed lower with 1.54% loss. The volume of 34.14M was 29% less than the 30 day average of 51.49M. The MACD (12, 26, 9) continued show a bearish sign and the MACD Histogram increased to -0.089 from -0.084. RSI (14) decreased to 47.35 from 52.53 with an increasing selling momentum. INTC is currently trading above its 50-day MA of $20.75 and is still below 200-day MA of $23.64.

SPY
SPY opened lower and closed lower with 0.25% loss. The MACD (12, 26, 9) turned to show a bullish trend on January 2, 2013 and the MACD Histogram decreased to 0.036 from 0.125. SPY is currently trading above its 200-day MA of $138.71 and its 50-day MA of $144.03. RSI (14) decreased to 67.14 from 70.32 with a decreasing buying momentum. SPY had broken through and closed above its resistance of $147.29, the R2 pivot point, on January 17, 2013.

General Electric: Expanding And Riding The Economic Improvement [Seeking Alpha]

General Electric Company (GE) is a diversified technology and financial services company and a leader in all markets in which it competes. Since our last article titled “General Electric Continues To Work On Things That Matter,” GE had increased 6.13% and closed at $22.50 as of Jan. 29, 2013. GE’s share price was boosted by a solid, strong Q4 2012 earnings with an EPS of $0.44, which beat analysts’ estimate of $0.43.

Recent Highlights

Improving economy. The U.S. economy continued to grow and the orders for durable goods probably climbed in December 2012, showing stabilized U.S. manufacturing following a mid-year slump. Markit’s U.S. purchasing managers index rose to a preliminary reading of 56.1 in January, a 22-month high and up from 54 in December. Production, orders, and employment improved, where readings above 50 signal growth. China’s economy growth perked up in Q4 2012, with manufacturing expanding at the fastest pace in two years.

On Jan. 18, GE reported better-than-expected profit and sales, where revenue from China grew 19% in 2012 to just under $6 billion on increased demand for jet engines and medical equipment. As quoted from Jeff Immelt, “I’d say we definitely saw China strengthen again at the end of the year. The big drivers of China continue to be healthcare and aviation. We believe that China momentum will likely continue into 2013.” The earnings call transcript for GE’s CEO discussion of Q4 2012 results can be accessed here. Lastly, eurozone factory and service-sector activity contracted again, but appears to be stabilizing.

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Top Bullish Stock On Wednesday: Walgreen [Seeking Alpha]

Wednesday’s market sentiment was driven by extreme greed with the Fear & Greed Index at 92, which had decreased from the previous close of 94. As reported by CBOE, the total put/call ratio was 0.95 for the day. The index put/call ratio was 1.15, and the equity put/call ratio was 0.67. The CBOE volatility index (VIX) put/call ratio was 0.45. The top stock had been identified through our daily options scanning process, with the scanning criteria where the daily call volume ratio was above 2.00 (2x of the average call volume) with a call volume above 10,000.

Name (Ticker) Call Volume Average Call Volume Daily Volume Ratio
Walgreen Company (WAG) 14,072 4,022 3.50

Source: Schaeffer’s Research

Unusual option activities can be an indicator or precursor of a major movement for the underlying stock. This article will try to identify the bullish factors for Walgreen Company.

Walgreen Company

Walgreen Company is the nation’s largest retail pharmacy with 8,516 drugstores in the United States. WAG had increased 9.32% and closed t $39.87 on January 30, 2013 since our last article, ‘Disappointing Numbers, But Walgreen Is Turning Around’, published on December 25, 2012.

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Optionity Core-20 Options Portfolio 01/30/2013

Optionity Core-20 Options Portfolio (Credit Put Strategy)

Stock criteria:

  • Large Cap with low beta
  • Fair/Under-valued
  • Consistent, strong earnings
  • Dividend distribution
  • High liquidity, large volume
  • Good/strong economic moat

This options portfolio consists of 20 core stocks. The portfolio will employee mainly the credit put strategy with the primary objective of generating consistent cash flow. The portfolio focuses on 1) sufficient sector diversification 2) risk/reward ratio control 3) margin of safety by leveraging options.

Daily portfolio performance will be updated at Seeking Alpha Instablog and Optionity.com.

Transaction details will be updated whenever new position is opened or the existing position is closed/expired/adjusted.

(click to enlarge)

Optionity Quick Report 01/30/2013

Company Name / Ticker Closing Price (Gain/Loss) Low-High Volume/30 Day Average
Intel (INTC) 21.37 (+0.09) 21.22 – 21.46 34.14M/51.49M
SPDR S&P 500 ETF (SPY) 150.08 (+0.59) 149.93 – 150.93 26.54M
iPath S&P 500 VIX Short Term Futures (VXX) 24.27 (+1.41) 23.11 – 24.33 8.57M

INTC

INTC opened slightly lower and closed with 0.42% gain. The volume of 34.14M was 33.70% less than the 30 day average of 51.49M. The MACD (12, 26, 9) continued show a bearish sign but the MACD Histogram decreased to -0.084 from -0.104. RSI (14) increased to 52.53 from 51.18 with an increasing buying momentum. INTC is currently trading above its 50-day MA of $20.73 and is still below 200-day MA of $23.67.

SPY
SPY opened slightly lower and closed lower with 0.38% loss. The MACD (12, 26, 9) turned to show a bullish trend on January 2, 2013 and the MACD Histogram decreased slightly to 0.125 from 0.192. SPY is currently trading above its 200-day MA of $138.64 and its 50-day MA of $143.74. RSI (14) decreased to 70.32 from 75.63 with a decreasing buying momentum. SPY had broken through and closed above its resistance of $147.29, the R2 pivot point, on January 17, 2013.

Verizon Wireless, Vodafone And Verizon Communications: Still Dominating In 4G LTE Market In The United States [Seeking Alpha]

Verizon Wireless, a mobile network operator, is the largest wireless communications services provider in the United States with 98.2 million subscribers as of Q4, 2012. Verizon Wireless is a joint venture of Verizon Communications (VZ), 55%, and Vodafone Group PLC (VOD), 45%. Vodafone Group is the second-largest wireless company in the world behind China Mobile (CHL) and the largest carrier in terms of the number of countries served. The share price of VOD decreased 2.04% and closed at $27.31 on January 29, 2013, since our last article of “Vodafone Group: Cash Flow Still King,” published on October 23, 2012. However, two dividends of $0.51 were distributed on November 20, 2012, and November 23, 2012. In this article, new developments will be updated for Verizon Wireless, Verizon Communications and Vodafone Group.

Major Developments

4G LTE expansion. On January 29, 2013, Verizon Wireless rolled out its 4G LTE coverage to the Pennsylvania counties around Philadelphia; the New Jersey and Delaware shores; and the Lehigh Valley, among other places. Verizon Wireless said its 4G LTE network covers 94 percent of the population in what it calls its Philadelphia Tri-State Region and 89 percent of the population of the country. Verizon Wireless also activated new 4G LTE coverage on three sites in Sullivan County, expanding and filling in coverage on the high-speed data network it launched locally in November 2011. On January 28, 2013, Verizon Wireless reported to expand 4G LTE network in Schoharie County, Greene County, Utica-Rome Area, and Elmira Area. Verizon Wireless continues to be the operator of the nation’s largest 4G LTE network.

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Enterprise Products Partners: Bullish And Rebounding In 2013 [Seeking Alpha]

Enterprise Products Partners L.P. (EPD) owns and operates natural gas liquids, NGL, related businesses of Enterprise Products Company, EPCO. EPD is a Houston-based master limited partnership that transports and processes energy commodities, primarily natural gas liquids and refined products. Since our last article of “Enterprise: A Bull Case For Strong Income And Solid Growth”, published on November 28, 2012, EPD had increased 9.65% to $56.49 on January 28, 2013. New developments will be updated for Enterprise Products Partners and the current options strategy will be reviewed.

Recent Developments

On January 29, 2013, EPD went ex-dividend with a cash dividend payment of $0.66 per share, scheduled to be paid on February 7, 2013. This distribution rate, which represents a 6.5% increase over the $0.62 per unit distribution rate declared with respect to the fourth quarter of 2011, is the 43rd distribution rate increase since Enterprise’s IPO in 1998 and the 34th consecutive quarterly increase. EPD had a steady distribution increase since 2009, as seen from the chart below.

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Top Bullish Stock On Tuesday: Devon Energy [Seeking Alpha]

Tuesday’s market sentiment was driven by extreme greed with the Fear & Greed Index at 94, which had increased from the previous close of 93. As reported by CBOE, the total put/call ratio was 0.97 for the day. The index put/call ratio was 1.14, and the equity put/call ratio was 0.68. The CBOE volatility index (VIX) put/call ratio was 0.51. The top stock had been identified through our daily options scanning process, with the scanning criteria where the daily call volume ratio was above 2.00 (2x of the average call volume) with a call volume above 10,000.

Name (Ticker) Call Volume Average Call Volume Daily Volume Ratio
Devon Energy Corporation (DVN) 14,685 3,503 4.19

Source: Schaeffer’s Research

Unusual option activities can be an indicator or precursor of a major movement for the underlying stock. This article will try to identify the bullish factors for Devon Energy Corporation.

Devon Energy Corporation

Devon Energy Corporation, an independent energy company, engages in the exploration, development and production of oil, natural gas and natural gas liquids, NGLs. The company’s operations are concentrated in North American onshore areas in the United States and Canada. The company has a broad portfolio of growth-oriented oil and gas assets and a rock solid balance sheet. DVN’s acreage includes sizable positions in the Rocky Mountains, Permian Basin, and Barnett and Cana-Woodford Shales, as well as conventional development projects and oil sands complexes in Canada. DVN closed at $56.96 with a 4.40% gain on January 29, 2013. DVN has been trading in the range of $50.89-$76.34 in the past 52 weeks.

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Zynga: Ready For Real-Money Games And Improving On The Cost Side [Seeking Alpha]

Zynga (ZNGA) is a leading provider of social game services with 240M average monthly active users over 175 countries. In late November, 2012, Zynga and Facebook loosened terms of longstanding alliance. Zynga no longer has the preferential treatment on Facebook, but Zynga is now able to market its games to the world outside of Facebook, opening up more revenue opportunities and venturing into higher margin markets. ZNGA closed at $2.84 with 14.06% gain on January 28, 2013. The volume of 56.17M was 3.35x of 30 day average volume of 16.76M. ZNGA had been trading in the range of $2.09-$15.91 in the past 52 weeks.

Bullish Factors

  1. Increasing earnings forecast and share buyback. In October, 2012, Zynga raised the lower end of its 2012 earnings forecast and also announced a $200 million share buyback plan
  2. Real-money gambling. 2013 is going to be a big year on the mobile gambling front as several U.S. states are close to offering legal online poker and casino games to their residents. A new partnership with British company bwin.party to offer online real-money gambling was announced in late October, 2012. Last month, Zynga started a preliminary application to run real-money gambling games in Nevada.
  3. Kabam, a social game developer, posted more than $180M in gross revenue in 2012, a 70 percent increase from the previous year, as reported on January 28, 2013. Kabam said only about 30 percent of its revenue in 2012 came from Facebook, the rest coming from partner websites and mobile devices. This news cheered Zynga investors and offered a good revenue model for Zynga to review and work on after its new partnership change with Facebook. Glu Mobile Inc. (GLUU), which designs, markets and sells mobile games, also jumped 15.22% on January 28, 2013 after the positive news release from Kabam.

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