Options In Focus: NFLX’s Cautious Bull and Whole Foods Climbs Late; Key Reports Loom Wed.

In the first half a 1 x 2 ratio spread was put up 1000 x 2000 times using the June 70 and 80 calls. For the seller or “ratio front spreader”, the lower strike was purchased and twice as many calls sold on the 80 strike. Combined, the position was established for a net debit of $1.26.

{loadposition in-article}

If shares remain below 70 by expiration, this cautious bull is out the entire debit representing $126,000 in capital. With shares near 64.60, this means our “cautious bull” is definitely bullish to a certain point as he or she needs NFLX above 71.26 or about 10% higher before finally breaking even by the third Friday in June.

Relative to an outright purchase of the June 70 call with its price of $3.80 per contract, the trader has reduced potential losses by about 67%, should shares not behave and remain below 70 at expiration. [Read the full article]

Natural foods grocer Whole Foods Market (WFMI) gained 3% in the regular session, pushing the stock to a three-month high. After the close, the natural foods grocer said Q1 profit jumped 62% to 32 cents a share, 6 cents above analysts’ estimates. Whole Foods said customers are coming back. The retailer extended gains late.

Before Wednesday’s open, the government releases January data for housing starts and industrial production. Meanwhile, Priceline (PCLN) and Hewlett-Packard (HPQ) release quarterly results Wednesday.

4:15 p.m. Update: U.S. stocks started the week strong, with the major indexes logging gains of more than 1%. But volume lagged, showing a lack of conviction.

The Dow gained 1.7%, the S&P 500 1.8%, the NYSE composite 2% and the Nasdaq 1.4%. Preliminary figures showed volume lower across the board.

Of the top 11 industry groups on the day, seven were energy-related, with steel and energy being the predominant groups.

Banks-Money Center also fared well. [Read the full article]

PowerShares DB US Dollar Index Bullish (UUP), which tracks the greenback against a basket of the most widely traded currencies, sank 0.84% to 23.43. UUP appears to be consolidating above its 200-day average, which it cleared Feb. 3.

iPath DJ-UBS Nickel Subindex Total Return ETN (JJN) gapped up 9.17% to 29.98 in above average trade. It outpaced all nonleveraged ETFs as it jumped high above its 10-week average and closed in the high end of its intraday range.

“There’s a screaming buy signal,” said W.H.C. Bassetti, a professor of finance at Golden Gate University in San Francisco and author of the ninth edition of “Technical Analysis of Stock Trends.”

JJN cleared prior resistance at 29.49 but it faces overhead resistance at 30.30 and 32.80. Although thinly traded, JJN is the only exchange-traded product tracking nickel prices. JJN has climbed 10.18% so far this month and is up 8% year to date. It soared 54% in 2009. [Read the full article]

In January, investors pulled $18.4 billion out of stock ETFs and poured $2 billion into bond ETFs, according to Morningstar Inc.

Scott Freeze, president and CEO of Street One Financial, a specialty broker-dealer that trades ETFs for portfolio managers, explains.

Freeze: Some fixed-income ETFs hold bonds that do not trade frequently, and/or there is not a deep market in certain bonds, especially those of lower quality, creating pricing disparity on the basket level from trading desk to trading desk.

In addition, because it is a very specific subset of bonds that make up the underlying components, any mass pressure to buy or sell the ETF will result in exponentially greater price impact than if the holdings were spread through more issues or more liquid products like many equity ETFs.

The final risk is that you may lose principal on a long position in a fixed-income ETF if interest rates rise, due to the inverse correlation between interest rates and the price of bonds. [Read the full article]

You may also like...