Stocks and Trading Thread - Channeling your inner Mono

[KRonn]

http://money.cnn.com/2011/04/26/news/companies/ford_1q_earnings_report/index.htm?hpt=T2
ford

Ford: Best first quarter since '98

NEW YORK (CNNMoney) -- Ford Motor combined strong sales and improved pricing to roar past earnings forecasts and post its best first-quarter profit since 1998.

Ford earned $2.6 billion, or 61 cents a share, up 22% from a year earlier, the company said Tuesday. The earnings not only topped the consensus forecast of 50 cents a share, they were better than the most bullish estimate of any analyst surveyed by earning tracker Thomson Reuters.

  The last time Ford earned this much in the first quarter was in 1998, when the company sold part of its financial services unit. The past quarter's performance underlined the continued turnaround at the company, which has now posted seven straight quarters of profit after years of losses.

Shares of Ford (F, Fortune 500) climbed nearly 3% in morning trading to $15.96. Ford's stock has struggled since the company missed earnings forecasts with its fourth-quarter results, then was hit by investor worries about the impact of higher gas prices.

Revenue rose 18% to $33.1 billion, which also easily topped the most optimistic forecasts, as the number of vehicles Ford sold worldwide climbed 12%. In March, Ford's U.S. sales topped those of rival General Motors (GM) for the first time since 1998.

"Our team delivered a great quarter, with solid growth and improvements in all regions," said CEO Alan Mulally in the company's earnings statement.

Mulally told analysts and journalists that rising gas prices could slow economic growth both domestically and worldwide, but that Ford still anticipates stronger demand for cars the rest of the year.

That forecast was buttressed by the consumer confidence survey released Tuesday by the research organization The Conference Board, which found 4.7% of consumers intending to buy a new car in the next six months, despite lingering concerns about the economy. That is the highest intention-to-buy reading in that part of the survey since 1999.

Mulally said the gas price rise is causing a shift towards smaller, fuel-efficent vehicles, which typically sell at a lower profit margin that larger cars and trucks. But he said Ford's new lineup of small cars leaves it well positioned for this shift, and Ford is finding small car buyers willing to pay extra for more features on their cars.

While the number of vehicles sold was not a surprise, the revenue per car was stronger than analysts had expected, helping the company to exceed expectations. Improved pricing allowed it to post increased profits in all of its various regions worldwide.
Cool cars from the New York Auto Show

Ford did not give a specific earnings target for the rest of the year, although it said it expects to continue to post improved results. But it warned that lower profit from its Ford Credit unit, higher commodity prices, seasonal factors and the need for increased investments and costs related to its longer-term plans will make it difficult to match the first quarter's strong results later this year.

Still, Ford said it expects to continue to gain market share in both the U.S. and European markets.

[MadImmortalMan]

Meh, either way, I took MiM's advice and sold off PSLV this morning at 22.90.  95%-ish percent profit is nothing to cry over.

And today it's down 5%. Nicely done.

[Tonitrus]

Meh, either way, I took MiM's advice and sold off PSLV this morning at 22.90.  95%-ish percent profit is nothing to cry over.

And today it's down 5%. Nicely done.

Damn, the timing of your advice to sell was uncanny.  I shall have you to buy you and the wife dinner if I pass by your way...which I may very well do...waffling between a Pacific Coast vs. Pacific Crest travel option down to California. 

[Alcibiades]

Intel has been doing very well the past 3 weeks.  Does the crowd have any thoughts on it?  Been holding it for a couple of years now.

[Richard Hakluyt]

I've come across a fair amount of hype about their new generation of chips, eg. http://www.bbc.co.uk/news/technology-13283882

It certainly sounds like good profits are in the pipeline. It is probably already taken into account by the share price.

[Ed Anger]

Hello, Silver crash.

[Caliga]

Is Cramer: peeing his pants.

[DGuller]

Wow, looks like a lot of margin calls are happening to commodities speculators. 

[MadImmortalMan]

Damn, the timing of your advice to sell was uncanny.  I shall have you to buy you and the wife dinner if I pass by your way...which I may very well do...waffling between a Pacific Coast vs. Pacific Crest travel option down to California. 

Honestly, I researched the hell out of it. So it was time well-spent.  I had a lot of skin in that one. It's always nice when a theory plays out like that.

[MadImmortalMan]

Wow, looks like a lot of margin calls are happening to commodities speculators.

CME is hiking margin requirements on a bunch of commodities by 25%. Oil now too. People with too much leverage are getting chopped back.

[DGuller]

Wow, looks like a lot of margin calls are happening to commodities speculators.

CME is hiking margin requirements on a bunch of commodities by 25%. Oil now too. People with too much leverage are getting chopped back.

Good.   

[MadImmortalMan]

So for the options thing...getting my feet wet with a small experiment.

Bought 700 shares Alcoa (AA) = -$11,839.64

Sold 7 options (May 17 calls) on AA = +$292.72


So right now, I have the stock. And the cash. And if the people who bought my options don't exercise them before they expire in a month, I keep it all and write another round of options next month. If they do, I sell them my stock at $17 for a small profit of about $70.

These are about to expire, so let's see.

The cost of the May 21 call right now is $0.03. So I have pocketed safely 36.75 per call, or $257.25. (Original call price $0.3975 when I sold them.)

AA is currently selling at $16.64, and I bought my shares at $16.94. So the value of the shares has declined by $210. It has been fluctuating just north and south of 17 per share all month, which suggests it is pinning to the strike price of 17, (the strike with the most trading volume on it). The highest the stock has been in May is right around the price the buyer of the 17 calls would need it to be to make any money off his calls (about 17.65).

The next leg for June 18 calls at a strike of $17 is currently at $.44. Or just slightly more than the one I am about to complete. So I can carry this over and write June calls at 17 and get another three hundred bucks or so. Or, I can dip into the money a little bit and write my calls at a $16 strike. Those are currently going for $.99. That would be about $700 worth of time premium I would pocket Monday instead of $300. I would be starting out the new month right about at the call buyer's break-even point though. And if exercised at 16 I would lose a little less than a buck a share on the transaction, almost nullifying the time premium money. That's where the downside exposure I am taking on comes into play. Now, we just came off a couple big down days in the market, so I think it makes more sense to go with the 17s again. Also, the biggest trading volume on the June calls is actually on the 18 strike. See the volume on the right end:



   
AA Jun 18 2011    30 Days to Expiration
   

   14.0 Call       2.70       2.74       2.94       0.18       3       372    
   15.0 Call       1.79       1.81       1.84       0.01       218       1,247    
   16.0 Call       0.99       1.02       0.99       -0.08       828       3,246    
   17.0 Call       0.44       0.46       0.45       -0.04       3,430       9,499    
   18.0 Call       0.17       0.19       0.17       -0.05       2,320       39,492    
   19.0 Call       0.06       0.08       0.08       -0.01       322       17,398


I would make about $120 off the 18 strike on 7 calls. (Or $1890 on 7 $14 calls for 2.70. Might sound like a good idea, but I would lose two grand on selling that stock at $14. That's risky.)

Another thing about the volume. For people who don't ever trade options or want to--knowing the option volumes is good for figuring out where other traders are expecting the stock to go. The consensus on Alcoa for June is that it will be trading higher by this time next month. A big majority are looking for $17 or higher. Here are the puts:


   

   14.0 Put       0.03       0.05       0.05       -0.01       1       472    
   15.0 Put       0.11       0.13       0.13       0.00       63       6,499    
   16.0 Put       0.33       0.34       0.35       -0.02       4,037       34,323    
   17.0 Put       0.77       0.79       0.78       -0.04       6,591       41,206    
   18.0 Put       1.48       1.52       1.55       0.03       14,698       6,859    
   19.0 Put       2.38       2.48       2.39       -0.02       150       4,351    

A little more spread out, but again more traders betting on a strike price above the current price of between 16 and 17. The puts are mostly around the current price, so I think they are mostly hedges. In other words, the calls are betting it will go up, and the puts are betting it will stay the same. So, it probably doesn't make sense for me to trade thinking AA will drop very much.

I'll write my next round Monday at either 17 or 18, depending on what happens between now and then.

[DGuller]

How would knowing the volume tell you much about traders' expectations?  For every person long an $18 call, there is someone short an $18 call.  Their expectations would seem to cancel out.

[MadImmortalMan]

How would knowing the volume tell you much about traders' expectations?  For every person long an $18 call, there is someone short an $18 call.  Their expectations would seem to cancel out.

The prices they are picking, whether seller or buyer doesn't matter. It's a guess on which direction the stock will go either way. If you think the stock is going down a point, you're not going to sell an option guaranteed to lose money if you're right. I'm selling an $18 call and you're buying an $18 call. I'm betting it won't go much above 18 and you're betting it will go above 18. Which one of us thinks in that situation it'll go down? Neither.

[mongers]

Jim Cramer just said the UK is the most investable country on Earth thanks to the budget cuts.

I'd be interested to know where he gets his smoke from.