Options Action Recap – 1/9/15: $JPM, $TWTR & $QCOM

by Dan January 10, 2015 3:44 pm • Commentary

On Friday’s Options Action on CNBC I detailed two trade ideas, the first in JP Morgan (JPM), a simple put purchase in front of next week’s Q4 results, and a long stock alternative in Twitter (TWTR).  Additionally, my friends Mike Khouw and Carter Worth had a very interesting near term bearish view on QCOM that I included in this post with my own remarks.


Name That Trade – $JPM: Bank Teller?

JPM trade idea From CNBC’s Options Action Friday Jan 9th, 2015:

TRADE: JPM ($59.40) Buy the Jan 59.5o put for 1.00

Break-Even on Jan Expiration:

Profits: below 58.50

Losses: up to 1.00 between 58.50 and 59.50, max loss of 1.00 above 59.50 or 1.7% of the underlying stock price.

Rationale:  With the stock down 1.7% today (Friday), and down 5% on the year, this could be a hard press on the short side, and waiting for an early week bounce could be the best way to play. The risk is missing the trade entirely if the stock opens lower on Monday.


For more detail, read here


New Investment – TWTR: ReTweeted (from Jan 8th)

TWTR trade idea From CNBC’s Options Action Friday Jan 9th, 2015:

I bought the stock on Thursday (read here), but I wanted to offer an options trade structure that would take advantage of the stock’s recent rise in implied volatility and create a wide band to the downside for potential loses but offers leverage to a sharp move higher, here was the hypothetical trade:

TWTR ($40) Buy March 35/45 Risk Reversal for .30
-Sell to open 1 March 35 put at 1.80
-Buy to open 1 March 45 call for 2.10
Break-Even on March Expiration:
Profits: gains above 45.30
Losses: lose up to .30 btwn 35 and 45.30, lose below 35



QCOM trade idea from Mike Khouw & Carter Worth from CNBC’s Options Action Friday Jan 9th, 2015. [this was Mike Khouw’s trade, NOT A RISKREVERSAL.COM TRADE]

Trade: QCOM ($74.40) Buy Feb 72.50 / 67.50 Put Spread for 1.25

-Buy Feb 72.50 put for $2.00

– Sell Feb 67.50 put at $0.75

Break-Even on Feb Expiration:

Losses: of up to 1.25 between $71.25 and $72.50, max loss of 1.25 above $72.50

Profits: of up to 3.75 between $71.25 and $67.50, max gain of 3.75 at 67.50


MY VIEW ON QCOM:  I have taken a couple shots on the long side in QCOM in the last year, the most recent back in November (read here).  The thought process was fairly simple, the stock is cheap, estimates have come done a lot over the last year few quarters, the company has the potential to buy back a ton of stock, with 26% of their market cap in cash with no debt, they pay a dividend that yields 2.25% and they have a near monopoly on smartphone chips.  In this easy money environment, I am shocked the company has not been targeted by activist investors forcing them to lever up and buyback a lot of stock.  Additionally, it is my view that the company should merge with computer and server chip behemoth Intel (INTC) as their efforts in mobile chips have yielded billions of dollars in losses and will likely never catch QCOM.  But I guess that is pie in the sky sort of stuff, the likelihood of a merger is low, and playing for activist involvement doesn’t sound much like an investment strategy.  So I am with Mike and Carter, one more gap back towards the 52 week lows in the highs $60s could be the spot to step in on the long side.