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Buzz on the Street: How Do You Like Them Apples?


A look back at the happenings on Wall Street this week, as seen by Minyanville's Buzz & Banter.

To be clear, this isn't a back-pat or a victory lap--we don't roll that way in the 'Ville and as shared above, I didn't make a downside bet despite my bearish inclinations -- The Minyanville Mission has always been to effect positive change through financial understanding, from the ABC's to the 401(k)'s, and doing so through a vicarious learning process has been recognized as a legitimate educational experience.

But enough about that -- the key to longevity in this business is not to look (down and) back, but to look out (and up). Per yesterday's second column, there were dueling technical patterns in play -- the S&P 500 (^GSPC) was churning under resistance (S&P 1400 is the first support, and S&P 1380 is the BIG support), while the NDX (^IXIC) was clinging to the 200-day like Ruby clings to her Ducky. And, given that Apple is the Most Important Stock in the World, the inability of the world's most loved stock to recapture it's 200-day provided a stealth tell. I've provided all three charts below.

Finally, and only because we've been talking about this for about a month, we should note that marijuana legalization passed in Colorado and Washington. I can't discuss specific names because they're too thin (perception is reality) but this furthers my belief that cannabis plays could provide the best risk-reward of any industry in the next decade.

Why? Four reasons: Increased tax revenue, lower crime rate, its additive, on the margin, to the job market and nobody on Wall Street covers these names. This isn't a trade, it's a long-term thesis, and the first such vibe I am comfy putting my name to in quite some time.

Lemme get this to you, more to come; please understand that with the nor'easter bearing down, and my family and home still without energy or heat, I will boogie back to the burbs midday before the Long Island Railroad shuts down, as is being rumored in the sticks.

Good luck today and remember, profitability begins within!


Click to enlarge

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Thursday, November 8, 2012

Bidding For Groupon Straddle
Michael Comeau

I may not get filled on this order, but I thought I'd lay out my rationale for Buzz subscribers: (note: Professor Sedacca's already put a similar trade on)

I have an order in to buy the Groupon (Nasdaq:GRPN) $4 straddle on this week's expiration. A straddle is simply buying calls and puts on a stock to speculate on a large move. By buying both puts and calls, an investor can bet on the size of a move rather than its direction.

I'm bidding $0.65, which means I want Groupon to trade below $3.35 or above $4.65 by the close of trading tomorrow.

So if Groupon is up 20% or down 14% tomorrow from the current price ($3.89), I'm in the money. Anywhere in between, the trade is a total loser.

My thinking is simple: we've seen huge, huge moves from controversial social media companies as of late, and I would assume Groupon will be subject to the same kind of volatility.

Plus, I'm encouraged by the fact that Groupon announced today that it cut 80 sales staff members as it is "using technology to increase productivity through automation". Sounds like BS to me, yet the stock is up today! What if that's actually a harbinger of doom? Or a sign of much higher margins to come?

And if Facebook (Nasdaq:FB) can rally as much as 24% on an upside surprise, and Zynga (Nasdaq:ZNGA) can fall as much as 22% after cutting guidance, I think Groupon has a decent shot at putting in a monster move tomorrow.

Note -- I used intraday highs to calculate these numbers because with these types of trades, I lock in gains pretty quickly as they go into the money.

Again, I might not get filled (haven't yet) -- but I wanted to give readers an idea of how I look at these situations. And whether or not it gets filled, I'll put in a post-mortem tomorrow morning.
No positions in stocks mentioned.

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