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Buzz Bits: Dow Green, Nasdaq Takes a Dip

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Editor's Note: This is a small sample of the content available on the Buzz and Banter.

Answers I Really Wanna Know... - Todd Harrison - 3:30 PM
  • Is this current juncture akin to 1987 or 1997?

  • Does that answer depend on further elasticity of debt?

  • Are the "higher lows" in volatility a sign that traders are still hedged (wall of worry) or a stealth indicator of slowing liquidity?

  • Do you see where the bank rally thus far failed?

  • Is the Verizon option market saying "no shot" to this deal?

  • Do you see beta beginning to fade a bit?

  • Are you being careful not to pay up for "fat" front month vol into earnings events?

  • Given how poorly the Yankees have played, is it a good sign that they're only nine out of first?


R.P.



Google Up "Anticipated Earnings Beat" - Adam Warner - 1:58 PM


So as we know, we can infer the magnitude (NOT the direction) of the expected earnings move via the bidup in the options board. Firms have sophisticated calculation methodologies, but basically all require a guesstimate as to where volatility will go after the release. And that is something we can all take a stab at.

That being said, Google (GOOG) is due in a few days, and a Phillie Phan friend of mine, still delirious from celebrating loss number 10,000, has calculated the expected move in GOOG. And amazingly it is only 4.5%.

But is this so amazing? Not really. GOOG is not a volatile stock. Options were overpriced forever here; it was often 20 volatility name with options trading 10 points above that. And earnings moves have been relatively muted for a couple years now.

GOOG volatility did finally dip to 20 a couple of months ago, but alas we have returned to 30 ahead of the release. It's not a stretch to anticipate a return back to 20 again. Which implies the current option bidup is a smidge more than the above, as GOOG would need to move 6% or so to pay for the option implosion.

Bottom line: GOOG options are still overpriced in my humble opinion, both ahead of earnings and in general. The high price level of the stock makes it scarier looking than the reality.

Position in GOOG



Lots to look at... - Jeffrey Cooper - 10:47 PM

  • Our old friend Limelight Networks (LLNW) shows a hot IPO cup and handle set up with the handle being a 1-2-3 pullback to the 20 day moving average.

  • TravelCenters of America (TA), which I mentioned a few times last week, is pivoting off support. This one is thin, so heads up!

  • Note how Apple (AAPL) kissed the 140 strike. Weeks ago I mentioned a projection of 140 to 145 on Stevie's Wonder.

  • Google (GOOG) is also fulfilling a projection towards 560.

  • Riverbed Technology (RVBD) is cookin' out of a squirrelly 1-2-3 pullback.

  • Cameco (CCJ) breakin' the 50 strike in a weak position.

Position in TA & LLNW.



Report: Target, Jeffmacke's Portfolio "Undervalued" - Jeff Macke - 9:25 AM

Updating our Target (TGT) story from last week, William Ackman has announced that his hedge fund owns a 9.6% stake in the discounter, including long-dated call options. In a statement, Ackman says he believes TGT shares are undervalued. While Ackman praises the company as having "the strongest operating management in the industry," he seeks a sitdown to discuss a laundry list of ways in which the company can unleash shareholder value. Ackman says he will give up to 1/3 of his profits from the TGT position to charity.

From where I'm sitting, Ackman is right about the company and obviously talking his book about the shares. That said, it can't possibly hurt TGT shares in the short run to have Mr. Ackman involved.

In an only slightly related story, Jeffmacke has announced that every stock in his portfolio is dramatically undervalued. "EMC (EMC), Safeway (SWY), Activision (ATVI)... really, I think everything I own should be much, much higher. Maybe Disney (DIS) should buy all three of them and then sell itself to, say, Microsoft (MSFT) for $80 a share". Jeffmacke says he plans to pay taxes with a significant portion of any profits realized from these and other positions. "It's just my way of reducing the federal deficit for the benefit of the children. Because that's the kind of caring, concerned guy Jeffmacke is."

Position in EMC, SWY, ATVI, DIS


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No positions in stocks mentioned.

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