logo
  Join        Login             Stock Quote

Vega Trade On DJX Sees Choppy Markets On The Horizon

 May 03, 2012 04:58 PM
 


DJX - 1/100 of the Dow Jones Industrial Average – A massive vega trade initiated in the DJX today sent off ripples across major indices and single-stock names as market makers scrambled to hedge their sales of volatility that occurred due to the trade. The purchase of 30,000 Dec. 2014 $135 calls on the DJX, delta-hedged by a June 2014 $132 collar, is a pure volatility play that makes money if markets grow increasingly choppy going forward. Signs Europe's crises may be coming to the fore once again could play a role in rising market volatility, which U.S. equities have largely been able to cast aside during the first quarter given positive domestic economic data and strong corporate earnings. The VIX has remained below 25 all year, passing much of its time just above or below the 17-level. For an investor anticipating rough seas up ahead, multi-year lows for the fear index provide an opportunity to lock in vega while it's relatively cheap rather than wait for Nostradamus' Armageddon, or more likely, continued turmoil across the pond, to blow volatility through the roof.

[Related -Lululemon Athletica inc. (LULU): Near-Term Risks Could Further Derail Investor Confidence]

LNKD - LinkedIn Corp. – Shares in the social networking site for professionals are up 0.25% this afternoon to stand at $106.65 ahead of the Company's first-quarter earnings report after the final bell today. Trading traffic in LinkedIn weekly calls suggests some traders are positioning for shares in the name to extend gains following the report. Notable bullish interest is building in the May 04 '12 $115 strike options where more than 2,000 calls changed hands against open interest of 878 contracts by 12:15 pm in New York. It looks like most of the calls were purchased for an average premium of $3.07 apiece, thus positioning traders to profit should shares in LinkedIn surge 11.0% to surpass the average breakeven price of $118.07 by expiration at the end of the week. A push above $118.07 would bring the shares within 4.0% of the stock's record intraday high of $122.70, a price at which shares have not traded since the May 19, 2011, IPO.

[Related -Linkedin Corp (NYSE:LNKD): New Marketing Efforts Should Improve Ad Sales]

LULU - Lululemon Athletica, Inc. – High-end athletic apparel retailer, Lululemon Athletica, hit yet another all-time high of $81.09 on Thursday, bringing the stock's stunning year-to-date rally to more than 70.0%. Bullish bets initiated on the stock during the past five trading sessions have certainly paid off for some strategists holding options that have in some cases skyrocketed in value this week. Last Friday, one trader looking for the stock to rally above $75.00 this week purchased 100 of the May 04 '12 $75 strike calls for $0.91 apiece. Today, the contracts are deep in-the-money, with those looking to buy the options paying as much as $6.10 apiece for the $75 strike calls. Paper profits available on the position at present are sizable, with premium on the calls up more than 600%. Meanwhile, calls purchased yesterday afternoon are also likely to yield substantial profits for LULU bulls at expiration. Open interest in the May 04 '12 $80 strike calls indicates traders purchased at least 700 of the contracts for a premium of $0.75 on Wednesday. Call buyers today saw the contracts trade up to an intraday high of $1.51 apiece.

iOnTheMarket Premium
Advertisement

Advertisement


Post Comment -- Login is required to post message
Name:  
Alert for new comments:
Your email:
Your Website:
Title:
Comments:
 

rss feed

Latest Stories

article imageHow the Chinese Slowdown Will Impact Your Investments

Most countries would find a quarterly growth rate of 7.3% a cause for a read on...

article imageHow To Profit From Foreign Investment In Real Estate

Though investors don't always capitalize on it, history has a way of repeating itself. In fact, when I saw read on...

article imageAnother Round Of Upbeat US Macro Reports

The US economy grew faster than expected in this year’s third quarter, according to this morning’s read on...

article imageDistinguishing The Fed's Securities Purchases From Monetary Expansion

There has been a bit of confusion about what today's FOMC announcement means with respect to Quantitative read on...

Advertisement
Popular Articles

Advertisement
Daily Sector Scan
Partner Center



Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.