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2015-07-29 11:35:52

Posted by
Russ Koesterich, CFA
BlackRock
Contributor
Macro

Some Overseas Markets May Prove More Resilient

Russ explains why he believes European and Japanese equities can continue to outperform U.S. stocks.

 

Though global markets sold off last week and have continued to slip in recent days, stocks in Europe and Japan are still faring better than their U.S. counterparts, reinforcing my views of these other developed markets.

As I write in my new weekly commentary, “More to Like Overseas as U.S. Stocks Sputter,” there’s one major culprit for U.S. stocks’ poor performance: Revenue growth for U.S. firms remains disappointing, even as earnings are beating expectations (albeit diminished expectations). In contrast, Europe is at least having a good earnings season, while Japanese equities continue to benefit from institutional buying.

Among the U.S. companies whose sales results fell short of expectations, according to Bloomberg data: IBM, Verizon, Yahoo, United Technologies and even Apple. As earnings reports and analyst call transcripts show, many of the companies reporting sales misses cited the strong dollar as a contributing factor. Unfortunately, this may prove a problem in the third quarter as well. Improvements in the U.S. economy have more investors convinced that the Federal Reserve (Fed) will begin lifting interest rates later this year, perhaps as early as September. Such expectations will likely continue to support the dollar.

European equities, meanwhile, at least have the cushion of stronger earnings, partly fueled by the euro’s weakness. In Europe, with Greece fading as a concern at least temporarily, investors are renewing their focus on earnings. According to Bloomberg data, as of Friday, roughly 55 percent of European companies beat estimates, with average year-over-year earnings-per-share growth of 15 percent. Banks and consumer discretionary companies did particularly well, with 75 percent exceeding expectations.

At the same time, Japanese stocks remain supported by Japanese pension funds continued rotation into domestic equities. The three largest public sector pension plans have already increased their equity allocation by more than 5 percent since last spring. However, their allocations remain well below the 25 percent target. This suggests there is room for further institutional buying in the second half of 2015.

The bottom line: Improving earnings in Europe and institutional stock-buying momentum in Japan underscore why I believe European and Japanese equities can continue to outperform U.S. stocks.
 

Russ Koesterich, CFA, is the Chief Investment Strategist for BlackRock. He is a regular contributor to The Blog and you can find more of his posts here.


This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of the date indicated and may change as subsequent conditions vary. The information and opinions contained in this post are derived from proprietary and nonproprietary sources deemed by BlackRock to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by BlackRock, its officers, employees or agents. This post may contain “forward-looking” information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this post is at the sole discretion of the reader.

©2015 BlackRock, Inc. All rights reserved. iSHARES and BLACKROCK are registered trademarks of BlackRock, Inc., or its subsidiaries. All other marks are the property of their respective owners.

iS-16209

This article is from BlackRock and is being posted with BlackRock’s permission. The views expressed in this article are solely those of the author and/or BlackRock and IB is not endorsing or recommending any investment or trading discussed in the article. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

2015-07-29 10:59:18

Posted by
Neil Azous
Founder & Managing Member
Rareview Macro LLC
Contributor
Macro

The Professional Community is Watching Crude Oil More than Anything Else

Yesterday, the professional investment community wanted WTI crude oil to both send a technical signal that it had bottomed and show a fundamental improvement in the supply/demand profile following the U.S. Energy Information Administration (EIA) data release in the late afternoon. As it turned out, however, neither action was a trigger for higher prices. We explain the ramification of that below.

Specifically, the chartists were looking for a close above $48.20 in WTI, which would have formed a key bullish reversal. At best, some are excited that yesterday’s low price of $46.88 was the ~76.4% Fibonacci retracement level of the $42.03-62.58 March 18 – May 5 up-move. We wonder if they had that same positive sentiment at the 61.8%, 50%, 38.2%, and 23.6% retracement levels along the way.

On the inventory side, stockpiles unexpectedly rose. For the week ended July 17, crude oil imports averaged 7.9 million barrels per day (b/d), well-above the year-to-date average of 7.251 million b/d. After last night’s failure today’s Department of Energy (DOE) becomes more balanced.

As a result, the negative sentiment clearly continues. While it is a different product, the front-month Brent crude oil futures contract made a new low earlier this morning and is down for a 6th straight day, the longest losing streak since last July.
 

Sight Beyond Sight® is a global macro trading newsletter written daily by Neil Azous. With close to two decades of institutional experience across asset classes, Neil interprets the day-to-day economic, policy and strategy developments and provides actionable trading ideas for investors. We invite clients of Interactive Brokers to sign up for a free trial in Account Management. If you are not a client of IB, you can sign up for a free trial by visiting our website.


This article is from Rareview Macro and is being posted with Rareview Macro’s permission. The views expressed in this article are solely those of the author and/or Rareview Macro and IB is not endorsing or recommending any investment or trading discussed in the article. This material is for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

2015-07-29 10:07:28

Posted by
IB Securities Lending Desk
Contributor
Securities Lending

Voltari sought after short

Voltari Corp (Ticker: VLTC) has been one of the most sought after shorts during the past few weeks. After lying dormant for a few years, shares in the digital advertising company spiked in mid-April, creating an influx of short sellers. The share price has subsequently come back down to more historically “normal” levels, albeit with quite a bit of volatility in recent weeks. Demand to short VLTC continues to exceed the shortable supply and the cost to borrow continues to trend higher.

Table - These were the 15 hardest to borrow securities during the week of 07/20/15 - 07/24/15

 

The analysis in this article is provided for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such investments. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

2015-07-29 04:20:52

Posted by
Darren Chu, CFA
Founder
Tradable Patterns
Contributor
Technical Analysis

WTI Crude (CL) Testing Daily Chart Descending Wedge Resistance

WTI Crude (CL) bounced yesterday breaking a 5 day losing streak, and is now testing descending wedge resistance (on the daily chart) and downchannel resistance (on the 4hr chart).  Although CL is sitting at a new 2015 low with the weekly MACD still sloping down, today's weekly inventory figures combined with the FOMC could produce a reversal on a daily chart descending wedge resistance break.  Note as well how the weekly and daily RSI and Stochastics are trying to bottom.  I will remain flat CL today and will wait for the post-FOMC dust to settle before considering going long CL tomorrow.

For more information about Tradable Patterns, click here.

 

WTI Crude (CME CL Sep15) Weekly/Daily/4hr/Hourly

 

Tradable Patterns was launched to demonstrate that the patterns recurring in liquid futures, spot FX and equity CFD markets can be traded consistently profitably. Tradable Patterns’ daily newsletter (blog) provides technical analysis on a subset of ten to twelve CME/ICE/Eurex futures (commodities, equity indices, interest rates), spot FX and US equity markets, which it considers worth monitoring for the day/week for trend reversal or continuation. For less experienced traders, tutorials and workshops are offered online and throughout Southeast Asia.

 

This article is from Tradable Patterns and is being posted with Tradable Patterns’ permission. The views expressed in this article are solely those of the author and/or Tradable Patterns and IB is not endorsing or recommending any investment or trading discussed in the article. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

2015-07-29 04:19:39

Posted by
Darren Chu, CFA
Founder
Tradable Patterns
Contributor
Technical Analysis

Natural Gas (NG) Targeting Weekly Chart Triangle Resistance Ahead of Storage

Natural Gas (NG) pushed higher yesterday, forming a higher July low (see the daily chart) versus the June low.  NG appears to be rallying back towards descending triangle resistance (on the weekly chart) ahead of Thursday's storage figures.  Weekly RSI, Stochastics and MACD are all sloping slightly up.  I am flat after having traded in and out of NG intraday longs yesterday, and will look to go long intraday today in the 2.8-2.82 range and take profit well ahead of the FOMC.

For more information about Tradable Patterns, click here.

 

NG (CME NG Aug15) Weekly/Daily/4hr/Hourly

 

Tradable Patterns was launched to demonstrate that the patterns recurring in liquid futures, spot FX and equity CFD markets can be traded consistently profitably. Tradable Patterns’ daily newsletter (blog) provides technical analysis on a subset of ten to twelve CME/ICE/Eurex futures (commodities, equity indices, interest rates), spot FX and US equity markets, which it considers worth monitoring for the day/week for trend reversal or continuation. For less experienced traders, tutorials and workshops are offered online and throughout Southeast Asia.

 

This article is from Tradable Patterns and is being posted with Tradable Patterns’ permission. The views expressed in this article are solely those of the author and/or Tradable Patterns and IB is not endorsing or recommending any investment or trading discussed in the article. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

 

2015-07-29 04:18:44

Posted by
Darren Chu, CFA
Founder
Tradable Patterns
Contributor
Technical Analysis

GBPJPY Weekly MACD Readying for Negative Crossover

The GBPJPY rebounded over 150 pips yesterday from the day's lows to the highs, but is beginning to tire again in today's Asian morning session.  Although weekly and daily RSI and Stochastics are flattish, the weekly MACD appears almost ready to make a negative crossover.  I'm short the GBPJPY from 192.65 and will look to take profit well before today's FOMC.

For more information about Tradable Patterns, click here.

 

GBPJPY Weekly/Daily/4hr/Hourly

 

Tradable Patterns was launched to demonstrate that the patterns recurring in liquid futures, spot FX and equity CFD markets can be traded consistently profitably. Tradable Patterns’ daily newsletter (blog) provides technical analysis on a subset of ten to twelve CME/ICE/Eurex futures (commodities, equity indices, interest rates), spot FX and US equity markets, which it considers worth monitoring for the day/week for trend reversal or continuation. For less experienced traders, tutorials and workshops are offered online and throughout Southeast Asia.

 

This article is from Tradable Patterns and is being posted with Tradable Patterns’ permission. The views expressed in this article are solely those of the author and/or Tradable Patterns and IB is not endorsing or recommending any investment or trading discussed in the article. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

 

2015-07-29 04:17:29

Posted by
Elaine Chen
Sales Trader
International Business Division
Guosen Securities
Contributor
Macro

GUOSEN Closing Bell (July.29)

MARKET

Chinese stocks closed higher today, with the benchmark Shanghai Composite Index ended at 3789.17 points. The A share market rebounded in the afternoon amid presence of ‘national team’, even though the market trading volume shrunk to half of its highest. Military and media sectors led the gains; none sectors fell. Combined turnover for both markets was 1080.4 bn yuan, down 17.1% dod.

 

CLOSE

%CHG

VOL (bn yuan)

%YTD

SH Composite

3789.17

+3.44

557.4

+17.14

SZ Component

12823.07

+4.11

523.0

+16.42

CSI300

3930.38

+3.13

372.2

+11.23

ChiNext

2693.87

+4.33

144.3

+83.04

 

Sector

Top 1

Led by

Top 2

Led by

Upward-leading

Military

601989

Media

000835

Downward-leading

 

 

 

 

 

NEWS

*Trade and investment between China and the Association of Southeast Asian Nations (ASEAN) have grown as mutual political trust has fostered deeper integration, officials said Wednesday. Trade between China and the ASEAN rose 1.6 percent year on year to reach 224 billion U.S. dollars in the first six months of the year, accounting for 12 percent of China's total foreign trade, said Gao Yan, vice commerce minister. Gao made the remarks at a press briefing of the 12th China-ASEAN Expo which will be held in Guangxi Zhuang Autonomous Region between Sept. 18 and 21. (Xinhua)

*Xinbang Pharmaceutical (002390.SZ)'s new application platform named "Gui Yi Cloud" has been put into operation and gained positive feedback in Guizhou province, DZH News reported, citing people with knowledge of the company. The platform has launched services in respect of drug delivery and medication consultation. (AAstocks)

*Shandong Sinocera Functnl Mtrl (300285.SZ) received warm market response in the roadshow. Management of the company has one on one exchange with several institutions in just two days. On the fundamental side, the company's second-quarter results recorded a high-speed growth (+76%-93% year-on-year, +229%-259% month-on-month), showing that the company's performance has seen a turning point. (AAstocks)

FUND FLOW

This article is from Guosen Securities Co., Ltd. and is being posted with Guosen Securities Co., Ltd.’s permission. The views expressed in this article are solely those of the author and/or Guosen Securities Co., Ltd. and IB is not endorsing or recommending any investment or trading discussed in the article. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

2015-07-28 15:57:58

Posted by
Allen Jackson
New Constructs, LLC
Contributor
Stocks

The Best and Worst of the Financials Sector

Sector Analysis 3Q15

The Financials sector ranks ninth out of the 10 sectors as detailed in our Sector Ratings for ETFs and Mutual Funds report. It gets our Dangerous rating, which is based on an aggregation of ratings of 43 ETFs and 225 mutual funds in the Financials sector as of July 7, 2015. See a recap of our 2Q15 Sector Ratings here.

Figures 1 and 2 show the five best and worst-rated ETFs and mutual funds in the sector. Not all Financial sector ETFs and mutual funds are created the same. The number of holdings varies widely (from 25 to 163). This variation creates drastically different investment implications and, therefore, ratings.

Investors seeking exposure to the Financials sector should buy one of the Attractive-or-better rated ETFs or mutual funds from Figures 1 and 2.

Figure 1: ETFs with the Best & Worst Ratings – Top 5

* Best ETFs exclude ETFs with TNAs less than $100 million for inadequate liquidity.

Sources: New Constructs, LLC and company filings

PowerShares KBW Property & Casualty Insurance Portfolio (KBWP) and PowerShares KBW Capital Markets Portfolio (KBWC) are excluded from Figure 1 because their total net assets (TNA) are below $100 million and do not meet our liquidity minimums.

Figure 2: Mutual Funds with the Best & Worst Ratings – Top 5

* Best mutual funds exclude funds with TNAs less than $100 million for inadequate liquidity.

Sources: New Constructs, LLC and company filings

The SPDR KBW Insurance ETF (KIE) is the top-rated Financials ETF and Davis Financial Fund (DVFYX) is the top-rated Financials mutual fund. Both earn our Very Attractive rating.

IndexIQ US Real Estate Small Cap ETF (ROOF) is the worst rated Financials ETF and Rydex Series Real Estate Fund (RYREX) is the worst rated Financials mutual fund. Both earn our Very Dangerous rating.

187 stocks of the 3000+ we cover are classified as Financials stocks.

Allstate Corp (ALL: $65/share), a recent Stock Pick of the Week, is one of our favorite stocks held by Financials ETFs and mutual funds and earns our Very Attractive rating. Since 2011, Allstate has grown after-tax profit (NOPAT) by 25% compounded annually. Allstate’s return on invested capital (ROIC) has improved to 14% from 6% in 2011. As we noted in our Stock Pick of the Week report, Allstate’s management is focused on long-term profit growth, not short-term revenue gains. Despite its track record since 2011, ALL remains undervalued. At its current price of $65/share, Allstate has a price to economic book value (PEBV) ratio of 0.7. This ratio implies the market expects Allstate’s NOPAT to permanently decline by 30%. If Allstate can grow NOPAT by only 4% compounded annually for the next five years, the stock is worth $103/share – a 58% upside.

Equity Commonwealth (EQC: $26/share) is one of our least favorite stocks held by Financials ETFs and mutual funds and earns our Very Dangerous rating. Equity Commonwealth’s NOPAT has declined from $423 million in 2008 to -$11 million in 2014. The company’s ROIC has mirrored NOPAT and declined from 7% in 2008 to a bottom quintile 0% on a TTM basis. The stock price does not seem to reflect these deteriorating business fundamentals. To justify its current price of $26/share, Equity Commonwealth would need to immediately achieve positive pretax (NOPBT) margins of 20% (compared to -2% in 2014) and grow revenue by 10% compounded annually for the next 15 years. Equity Commonwealth has only grown revenue by 1% compounded annually since 2008. We believe it will be very difficult for the company to achieve such high revenue growth for the extended period of time implied by its stock price. Investors can find much better value elsewhere in the Financials sector.

Figures 3 and 4 show the rating landscape of all Financials ETFs and mutual funds.

Figure 3: Separating the Best ETFs From the Worst ETFs

Sources: New Constructs, LLC and company filings

Figure 4: Separating the Best Mutual Funds From the Worst Mutual Funds

Sources: New Constructs, LLC and company filings

Disclosure: David Trainer owns ALL. David Trainer and Allen Jackson receive no compensation to write about any specific stock, sector or theme.
 

About New Constructs

QUESTION: Why shouldn’t ETF research be as good as stock research? Why should ETF investors rely on backward-looking price trends?
ANSWER: They should not.

Don’t judge an ETF by its cover. Take a look inside at its holdings and understand the quality of earnings and valuation of the stocks it holds. We enable you to choose the best ETF based on its stock-picking merits so you do not have to rely solely on backward-looking technical metrics. 

The figure below details the drivers of our forward-looking Rating system for ETFs. The drivers of our predictive rating system are Portfolio Management and Total Annual Costs. The Portfolio Management Rating (details here) is the same as our Stock Rating (details here). The Total Annual Costs Rating (details here) captures the all-in cost of being in an ETF fund over a 3-year holding period, the average period for all fund investors.

Cutting-edge technology enables us to scale our forensics accounting expertise so that we can cover enough stocks to cover the ETFs that hold them as well. Learn more about New Constructs. Get a free trial. See what Barron’s has to say about our research. Cutting-edge technology enables us to scale our forensics accounting expertise so that we can cover enough stocks to cover the ETFs that hold them as well. Learn more about New Constructs. Get a free trial. See what Barron’s has to say about our research.

 

This article is from New Constructs, LLC and is being posted with New Constructs, LLC’s permission. The views expressed in this article are solely those of the author and/or New Constructs, LLC and IB is not endorsing or recommending any investment or trading discussed in the article. This material is for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

2015-07-28 13:47:18

Posted by
Neil Azous
Founder & Managing Member
Rareview Macro LLC
Contributor
Macro

Overnight Setup Complete...Today is a Range Trade ex-Crude Oil

Today’s edition of Sight Beyond Sight has something for everyone. If you are a day trader, we provide a quick road map going into tomorrow’s Federal Reserve meeting. If you are trying to read the tea leaves in China and like newsletters that provide conjecture, we offer a treasure map, with an X to mark the spot where the gold is hidden. If you are an investor we walk you through our view on the FOMC meeting and share with you what our proprietary Fed model is saying. And, of course, as always we highlight the top observations from the banks, media and social networks.

We could be wrong, but we have seen most of the day’s trading ranges in asset markets already and with the Federal Reserve meeting tomorrow it is hard for us to see anything more. If we are wrong, the asset that moves should be Crude Oil as higher prices will materialize into the release of this afternoon’s American Petroleum Institute (API) data and tomorrow’s mornings Department of Energy (DOE) inventory report. After a 20% down move without interruption this is not really a leap to be honest. If you hold the view, as we do, that the weakness in the barrel was the catalyst in early July for a strong US dollar, then to broaden out the argument would go on to suggest that the US dollar's early bid tone today reverses and walks into tomorrow’s statement offered as the barrel rallies. Outside of a pause in the energy sector's relentless selling, we have no idea what that means for US equities and instead will continue to watch Biotech & Life Sciences – SPDR S&P Biotech ETF (XBI) – and Software & Services – FB, AMZN, NFLX, GOOG (FANG trade) – to see whether there is further downside in prices.
 

Sight Beyond Sight® is a global macro trading newsletter written daily by Neil Azous. With close to two decades of institutional experience across asset classes, Neil interprets the day-to-day economic, policy and strategy developments and provides actionable trading ideas for investors. We invite clients of Interactive Brokers to sign up for a free trial in Account Management. If you are not a client of IB, you can sign up for a free trial by visiting our website.

 
This article is from Rareview Macro and is being posted with Rareview Macro’s permission. The views expressed in this article are solely those of the author and/or Rareview Macro and IB is not endorsing or recommending any investment or trading discussed in the article. This material is for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

2015-07-28 12:26:14

Posted by
Andrew Wilkinson
Chief Market Analyst
Interactive Brokers
Contributor
Options

Chesapeake rally inspires bullish put option play

Shares in Chesapeake Energy Corporation (Ticker: CHK) are higher by 1.5% at $8.55 despite ongoing weakness in the oil patch. The rally in the stock appears to have inspired a bullish put spread in the September expiration. An investor appears to have sold 60,000 spreads using the 8.00 and 6.00 strike prices for a credit of 61-cents on the Philadelphia Exchange. The option strategy is possibly a well-timed wager that shares in Chesapeake may have found bottom. Yesterday the share price fell to $8.11. The share price has fallen from $28.00 a year ago and this investor is happy enough today to take on the risk of a decline below $8.00 over the next couple of months in exchange for the net credit of 61-cents. That means that the trade would start to lose money for the investor at a share price of $7.39 or 13.6% below its latest traded price.

Chart – Chesapeake reached $8.11 in Monday’s rout

 

The analysis in this article is provided for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such investments. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.
 

 

 

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The material (including articles and commentary) provided on IB Traders' Insight is offered for informational purposes only. The posted material is NOT a recommendation by Interactive Brokers (IB) that you or your clients should contract for the services of or invest with any of the independent advisors or hedge funds or others who may post on IB Traders' Insight or invest with any advisors or hedge funds. The advisors, hedge funds and other analysts who may post on IB Traders' Insight are independent of IB and IB does not make any representations or warranties concerning the past or future performance of these advisors, hedge funds and others or the accuracy of the information they provide. Interactive Brokers does not conduct a "suitability review" to make sure the trading of any advisor or hedge fund or other party is suitable for you.

Securities or other financial instruments mentioned in the material posted are not suitable for all investors. The material posted does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation to you of any particular securities, financial instruments or strategies. Before making any investment or trade, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice. Past performance is no guarantee of future results.

Any information posted by employees of IB or an affiliated company is based upon information that is believed to be reliable. However, neither IB nor its affiliates warrant its completeness, accuracy or adequacy. IB does not make any representations or warranties concerning the past or future performance of any financial instrument. By posting material on IB Traders' Insight, IB is not representing that any particular financial instrument or trading strategy is appropriate for you.