On Friday’s Options Action on CNBC we opened the show with a discussion on the duration (49 days) of the current state of the rally without a 1% move in either direction (watch here), and what that might mean for the ability of the broad market to continue to make daily new all time highs without a meaningful pull back. Prior to the show we detailed a trade idea (SPDR Senses Tingling) in the SPY that can be used as a portfolio hedge (or an attractive risk reward on an outright bearish bet), offering a 6 to 1 potential payout on a move down to 2100 in the S&P 500 (SPX) between now and May expiration.
We also took a look ahead to Tesla’s (TSLA) Q4 earnings expected after the close tomorrow and I detailed a collar strategy for existing long holders who might seek zero cost protection after the stock’s sharp gains of 50% since December 2nd (watch here). Completely mental!
Implied Movement in the SPY (four day week) off of a $235.09 close last Friday, SPY Feb 24th weekly straddle (call premium + put premium) went out offered at $1.75, if you bought that and the implied movement for the week you would need less than a 1% move in either direction to break-even, a rally above $236.84, or a decline below $234.34. Seems kind of reasonable, when you consider that last week’s implied movement was $1.81 and easily realized ($231.50 Feb 10th close to $235.09 Feb 17th close).
The most significant news from the Fed comes on Wednesday with the release of the Minutes from their January meeting, per WSJ:
The Federal Reserve releases minutes from its Jan. 31-Feb. 1 meeting. The release could provide more clues about the timing of interest-rate increases this year. Fed Chairwoman Janet Yellen indicated in testimony before Congress this month that a rate increase at the central bank’s March policy meeting is in play given signs of rising inflation and a tightening labor market. Meanwhile, the U.S. housing market will get a checkup with the National Association of Realtors’’ release of data on existing-home sales for January. The big question is whether a recent rise in mortgage rates is starting to slow the housing market, which has been a source of strength in the world’s largest economy in recent years.
EARNINGS OF NOTE: [Before Open = BO, After Close = AC]
Newmont Mining (NEM) – AC: implied one day move in the options market ~3%, a little shy of the 4 qtr average of 3.5%.
TJX Cos (TJX) – BO: implied one day move in the options market ~3.1%, a little shy of the 4 qtr average of 2.5%
Toll Brothers (TOL) – BO: implied one day move in the options market is 5.5%, which is shy of the 4 qtr average of 6.5% (the stock has risen after all four of the last reports).
Tesla (TSLA) – AC: implied one day move in the options market ~6%, rich to the 4 qtr average of ~3%. My Options Action Co-panelist Mike Khouw had some thoughts on TSLA into the print (Will Earnings Give Tesla Shareholders a Boost? or a Shock?)
Kohl’s (KSS) – BO: implied one day move in the options market ~6%, which is well shy of the average over the last 4 quarters of 10%!
Hewlett Packard Enterprises (HPE) – AC: implied one day move in the options market ~4%, shy of the 5 qtr average of 5.5% since its split in 2015.
Nordstrom (JWN) – AC: implied one day move in the options market ~8.5%, which is essentially in line with its 4 qtr average.
The Snap IPO roadshow kicked off in London yesterday, and will be barreling through the U.S. this week, eying a pricing of March 1 or 2. The reception has been mixed, but I suspect not too different than the sort of skepticism prior to other much anticipated tech IPOs throughout this bull market: LinkedIn’s 2011, Facebook’s 2012, Twitter’s 2013 and Alibaba’s 2014.
Should you or shouldn’t you?? Start here:
Snap Finds Its IPO Is a Tough Sell in London, by Giles Turner, Bloomberg
Why I’m leaving Snapchat and so are all your friends by Owen Williams via Medium
WhatsApp’s New Feature Continues Facebook’s Snapchat Mimicry By Mike Isaac, NYT
Snap Tries to Jump-Start Spectacles’ Sales as Novelty Fades, by Georgia Wells, WSJ
One of Snap’s top ad execs is leaving right before the IPO, by Kurt Wagner, Recode
In case you have never Snapped, per Recode’s Peter Kafka, Snap created a ‘How to Use Snapchat’ video for Wall Street
Oh and I doubt you missed it, but there were explosive claims about systemic sexism at Uber, and a culture that appears to look the other way. Recode;s Kara Swisher of course was all over the story: Uber CEO Travis Kalanick says the company has hired former Attorney General Eric Holder to probe allegations of sexism