Options In Focus: More Than a Profitable Call and Earnings Flood Continues Monday

For option bulls along the likes of a February call contract and profitable on paper entering the session, shorting stock instead of selling to close the long call position allows the trader to act like a bear for the remaining life of the contract. When dealing with ultra liquid penny wide option markets like those available in the SP-500 ETF (SPY), this strategy is certainly viable.

To illustrate, intraday and with the SPY trading at 111.40, the February 110 call is for all intents and purposes trading at parity. The quoted market is two cents wide and priced mid market two cents over the share price at $1.42.

Let’s say a trader purchased the five of the calls last Friday for $0.42 in anticipation of some market follow-through on the market’s rally attempt from corrective lows. Instead of exiting the position during the session by selling the contracts and pocketing a $1.00 in profits, the trader could elect to short stock instead. [Read the full article]

Monday, however, will be busy. Over 100 companies are scheduled to release earnings, and few have specified when.

The most notable stocks that will release their quarterly results before the market opens include American Public Education (APEI), Cabot Oil & Gas Corporation (COG), Constellation Energy Group (CEG) and MedAssets (MDAS). Several top-rated companies are set to release results after Monday’s close.

No U.S. economic news is scheduled before the market opens. The first two items on the day’s docket are comments from Janet Yellen, San Francisco Fed President, at 10:30 a.m. EST, followed by Fed Chief Ben Bernanke at 11 a.m. EST.

The Dow, Nasdaq rose 0.1%, the S&P 500 0.2%. The NYSE composite finished fractionally higher. Volume rose, according to preliminary readings.

China Agritech (CAGC), Cree (CREE) and WebMD (WBMD) made new highs. WebMD found support at its 50-day line. NetGear (NTGR) gained 2%. [Read the full article]

Card issuers have reacted before the effective date by raising various fees and rates, trimming some customers’ credit limits and rewards and closing some accounts.

To avoid or at least minimize such consequences going forward, it is now more important for cardholders to be aware of the new rules. They should also read notices from card providers that they used to ignore, says Ethan Ewing, president of Bills.com, an online financial advisory service.

The impact could be broad, says Bill Hardekopf, chief executive of LowCards.com. “Far more cardholders will get hit by new fees, higher rates, fewer rewards, more credit limits than the number who are helped by the new rules,” he said.

The Web site helps consumers comparison shop for plastic. It receives a fee from some card companies each time a visitor clicks through its site to open an account with a card issuer.

Interest rates. Card companies will be barred from raising rates on new accounts for 12 months. [Read the full article]

The Fed’s raising of the discount rate it charges banks, its first interest rate move since December 2008, sparked a sell-off in bonds.

The market recovered ground in light trading volume through Friday’s session after Fed officials insisted that the increase in the discount rate did not signal a change in monetary policy and that borrowing costs would remain low.

“That brought a sense of relief,” said Kathleen Stephansen, chief economist at Aladdin Capital Holdings. “With the Fed saying that this is a more technical step in the exit strategy than a tightening of credit conditions, the market was able to come back” from the earlier sell-off.

Adding support to Friday’s comeback: The consumer price index, a key gauge of inflation, rose less than expected in January.

The two-year note’s yield briefly touched a one-month high. It last traded flat on the day, yielding 0.92%. [Read the full article]

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