Options In Focus: Adjusting a Loss? and Hershey Raises Its Dividend, Tops Estimates

Unlike with trading just stock alone though, on occasion the option strategist might consider defending a paper loss with a repair strategy, if the conditions and the trader’s own acumen permit. In the following lets discuss one simple way in which option traders can consider this type of position adjustment.

Like its name suggests, the repair strategy is used to fix a problem. To keep things simple, we’ll assume the problem in question is an outright and directionally geared option. Since the time of purchase, the position has turned somewhat ugly on paper, due to an adverse move in the stock. For our purposes, let’s assume a long call position.

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The typical reaction for a trader looking to keep their losses contained would be to exit the long call for a loss, if their risk threshold had been reached. [Read the full article]

Hershey (HSY) may not have won the chocolate wars, but the company says it doesn’t need Cadbury (CBY) to succeed going forward.

“We continue to be encouraged by our position in the marketplace and confident in continuing future success,” CEO David West said in his first public comments since Cadbury agreed to a buyout by Kraft Foods (KFT) in January.

On Tuesday, the maker of top-brand sweets posted Q4 earnings of 63 cents a share, topping expectations.

Revenue grew 2.2% to $1.4 billion. Shares rose on the news, despite the fact that total volume of candy sold slipped as consumers cut back on candy purchases. [Read the full article]

Don’t be frustrated. Exchange traded funds available to U.S. investors can get you past the border and into the market. But before you buy (or short), you need to know what you’re getting into.

Most ETFs are passive investments. The funds typically are modeled to track a benchmark index or a fixed basket of stocks (which come to the same thing).

Ishares FTSE/Xinhua China 25 Index (FXI) tracks the FTSE/Xinhua China 25 index, much as PowerShares QQQ (QQQQ) shadows the Nasdaq 100 index.

If the fund is passive, you must be active. The fund is a dumb tool that holds the proper instruments to get you into the market you want. No smart managers are there to pick great stocks or take profits.

Contrast a passive instrument to a mutual fund, which is an active investment with managers that analyze and invest in stocks, bonds or commodities. Here, you can be more passive — as long as the fund is performing well. [Read the full article]

Weekly oil inventory data released Tuesday and Wednesday showed a large build in crude stockpiles. Data also showed refinery activity slowing to 20-year lows as the industry wrestles with oversupply of gasoline and other finished products.

Oil futures point to a mild increase in price through the end of the year. Natural gas futures indicate a more optimistic spread between spot and futures prices, with spot prices late Wednesday at around $5.40 per million Btu and the December contract price of $6.42.

International oil production remains sluggish. But U.S. exploration and production, particularly among natural gas producers, is booming, says William Herbert, co-head of research at Simmons & Co. International.

The motivator: hedged production. “They are locked in at prices considerably more robust than what the cash markets are yielding,” Herbert said.

Domestic gas producers hedged an estimated 50% of their 2010 production at an average 24% above current spot prices. [Read the full article]

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