Corning (GLW) Case Study - The Importance of Following Options Flow

In the first three minutes of trade today I saw big blocks buying the February $22 calls in Corning (GLW) at $0.42, offer side buying and soon that swelled to 5,000 contracts (More than 8,000 traded by day end). Shares opened quietly but started to make a run soon after, sending the calls for $0.42 up to $1.15 just before 3pm, an easy trade for an option scalper, nearly a 200% gain intraday.



I've come to learn that often the hottest action in the first 15 minutes in the options market tends to be the best for day trading options, and this is just an example of something seen most every day where there are opportunities to flip options intraday for 100%+ gains, especially near option expiration when much of the premium has been sucked out of these names that have very liquid trading and $1 strike increments.

Weight Watchers (WTW): Insider Info into Earnings, or Just a Hungry Bull?

Weight Watchers (WTW) posted a slamming quarter this morning, the classic beat and raise, blowing away Street estimates. Shares are indicated to open higher by more than 11% this morning, light pre-market volume, but looks like it will be a big winner today.

On February 14th, Monday, I noticed very unusual action in the Weight Watchers (WTW) call options and put out the following note to subscribers:

"Weight Watchers (WTW) touching new highs today on big volume into earnings on 2/17 and call volume of 6,764 is 25X daily average, a block of 4,273 bought at $0.95 and more than 5,450 trading as opening buys in the February $45 calls, OTM with shares at $44 and Feb IV up 20% on the day. Put volume in non-existant and shares have been on quite a run on building volume lately, maybe due to the failure of all the diet pills with the FDA denying all parties. There was also substantial accumulation with big blocks of shares this morning. The $3.25B Company has also frequently been noted in takeover chatter, shares trading 15.9X earnings and 2.3X sales, not a bad value. Shares rose on 12/7 with BofA raising it to Buy with a $48 target. Weight Watchers has not been exactly blowing away earnings of late, but maybe the New Year brought about more business with obesity a continued concern in the US and abroad, although April tends to be the best month for shares."

Another 1,360 of these calls traded yesterday and the March $45/$50 calls also attracted some unusual activity.

Those $0.95 calls will be worth more than $6 today, more than a 500% return over the course of 3 days, and nominal more than a $2.15M profit.

Now that is a fat pay-day, but making a directional bet of that size the week of options expiration has me thinking someone had some insider information on the earnings number.

Whole Foods (WFMI): Reviewing A Successful Double Calendar Spread Earnings Startegy

Whole Foods (WFMI) was set to report earnings on February 9th after the close and I had a good feeling it would continue its momentum from strong earnings last quarter, and also felt the options market was not pricing in enough volatility, seeing it as a stock that had consolidated with tight Bollinger Bands and ready to explode. I was closely following the options activity leading up to earnings and although more than 10,000 March $50 puts accumulated the action looked to be hedging as all the large blocks of stock were being bought right alongside. Also, I was seeing accumulation in May $60 calls, far OTM calls that are seeing a positive move coming. On a fundamental basis, shares do trade at a premium to other grocers, but they should with the growth and ability to pass on rising commodity costs to a more affluent customer base. The Street was also seriously under-estimating Whole Foods with most price targets sitting below $50. I now see shares as fairly valued, trading at the 10 year average P/E of about 33X. Same store sales rose at an impressive 9.1% in the quarter, and there is plenty of room for expansion going forward.

Directional bets can be dangerous on big earnings movers so I went with a more neutral strategy despite my positive inclinations. I decided to have my clients put on the February/March $60/$48 double calendar spread at $0.87, selling the February $60 calls and $48 puts to buy the March $60 calls and $48 puts. I chose these strikes because I felt these front month options were the most "juiced" with premium and was also my target moves for a beat/miss. The strategy is effective especially with less than a week left until options expiration when the front month IV is at a wide spread compared to the next month out.

Whole Foods delivered a stellar quarter and shares shot higher, reaching highs of $60.94 and settling Friday at $59.67 on the close. I decided to take profits mid-day on Thursday closing the spreads at $1.32, a 51.72% gain overnight. Not the biggest return, but a great execution of a neutral strategy and using options to effectively trade earnings.

A diagram of the original strategy P/L is below (ThinkorSwim Analyze Chart):



For a look at some of my recent earnings previews and along with option trading strategies, most of which were a resounding success, please visit (Scroll to Bottom of page): http://optionshawk.com/index_files/optiontrader.html

Bullish Breakout from Today, Many Large Cap

CSX Corp (CSX)



3M (MMM)



Lamar Advertising (LAMR)



Consol Energy (CNX)



Helmerich and Payne (HP)



Moody's (MCO)



Statoil (STO)



Thomson Creek (TC)



Grainger (GWW)



Waste Mgmt. (WM)



BE Aerospace (BEAV)

Fresh Breakout Alerts that Triggered Today with Charts

NPS Pharma (NPSP) Triggered at $6.75 - First Target $7.50, Potential for Bull Flag Breakout, Good Volume



Aluminum China (ACH) Triggers at $23 - Target $27 on Ascending Triangle Break (Call Buying)



Analog Devices (ADI) Triggers at $31 - Ascending Triangle Breakout (Call Buying) - First Target $34 2008 Highs



Digital River (DRIV) Triggers at $32 - Breaks into Massive Gap (Call Buying) - Target Near $40



Calix (CALX) Consolidation Breakout - Recent IPO's in Tech Hot (Also Like MOTR, IL)



Tupperware (TUP) - Triggered at $44 (Already +$2) - Call Buying Later - Ascending triangle Breakout and Room to Run - Target $50



Johnson Controls (JCI) Triggered at $30.50 for Channel Breakout - Target $35 - Call Buyers Came in Later



Pharmasset (VRUS) - Triggered at $29 - Simple Resistance Breakout - Target $34 Resistance



Steve Madden (SHOO) - Triggered at $40 - Target $45



Stanley Black & Decker (SWK) Bull Flag Breakout, Developing - Target $65



Cognizant (CTSH) - Triggered $64.50 - Resistance Breakout - Target $70



Carribou Coffee (CBOU) - Triggered at $10.25 - Consolidation Breakout - Target $12



99 Cent Stores (NDN) - A Bit Late but Great 10 year Weekly - Gap Fill to $20



Carbo Ceramics (CRR) - Triggered at $83 - Major Resistance Breakout - Target $100



Estee Lauder (EL) - Triggered at $62 - Descending Triangle Breakout - Target $65

12 Fresh Breakouts You Need to be Watching

Xyratex (XRTX) Breaks Channel Down for Implied Move to $17 - Great Value Name as Well




Infineon (INFN) Weekly Chart Breakout for Potential Move to $15



Lexmark (LXK) Key Break of Resistance - Should be Good to $45





Cypress Semi (CY) Breaks Key $11.75 Resistance for Implied Move Exactly at #13.75 May Highs



Viacom (VIA.B) Descending Triangle Breakout for $40 Target




Infosys (INFY) Explosive Ascending Triangle Breakout - Target $70




Life-Time Fitness (LTM) Descending Triangle Breakout - 24.5% Short Float - Target $50




Concur Tech (CNQR) Breakout to Lifetime Highs - 13.7% Short Float - There is a Reason All those Feb. 50 Calls Bought Recently - First Target of $55



Ardea Bioscience (RDEA) Channel Breakout - Longer Term Bull Flag - Target $30




Vocus (VOCS) Massive Descending Triangle Breakout Above 200 EMA - $20 Target





Synopsys (SNPS) Channel Breakout on Weekly - $26.50+ target



Scholastic Corp (SCHL) Channel Breakout - $30 Target

My Rules for Who to Follow on Twitter

As of this writing I have 1,927 followers and follow 71, and I feel the higher that ratio the better.

Around half of the 71 follows for me are somehow tied to the Oakland Raiders, Boston Bruins, Fantasy Baseball/Football, NFL/NH:, and Hunting/Fishing, but I thought I would provide my "technique" for finding worthy follows on Stock Twits.

1) Less is More! - I do not mind the occasional jokes, or worthless info, but the less fluff the better when it comes to trading the market. I pull up my ST Desktop a few times an hour throughout the day and want to see something meaningful.

2) Originality - I could care less about Apple, Google, Goldman, etc. chart as everyone is watching those charts, and good luck trading against the robots that are faster, smarter, and have more money. The way I find people that have clever and fresh ideas is often via searching stock symbols of names I come across and find interesting. I then check the stream, and if you were someone onto the name before me, I consider you a worthy follow.

3) Lack of Show-Boating - I can be as cocky as the next guy, but if you made a great trade and want to tell everyone about it, sure go ahead, but if you do it more than once, well...then there is a problem

4) Insight - I like to find people that specialize in a sector, whether it be Financial, Technology, or Commodities. I am someone that will trade any stock, any sector, any country, but also realize there are plenty of people that focus solely on an industry group that have much better insights than I do, or at least in a shorter amount of time and without having to do all the messy research

5) Chart Mongers - I probably follow too many chartists because I honestly never actually look at the charts, but use it for idea generation and look at the chart myself. If my opinion lines up with that of the person providing the chart, it adds the extra bit of confidence....always a good thing to have

With that said here are my StockTwitters I follow most closely (in no particular oder):

News/Info: @MFFAIS, @BreakoutBeacon, @bloombergnow, @livevol_Pro @TradeHawk, @TradeIdeas

Chartists:@stt2318, @flare9x,@harryboxer, @TheMeatBaron, @Zortraders, @MonsterTrader, @TraderFlorida, @RaginCajun @DanZanger @sssc @gtotoy

Knowledgeable Comments and Market Inight: @Xiphos_Trading, @biggercapital, @ukdaytrader, @rayjman, @CondorOptions, @agwarner, @attitrade @stevenplace

Great Swing/Day Traders: @Legacy_Trades, @traderjaz, @SellPuts, @johnwelshphd

Industry Focused: @TMTanalyst, @adamfeurstein, @mikehuckman

I am sure I am leaving a bunch of great contributors off the list, and apologize in advance.

The truth is I have never taken much time to find people to follow, so feel free to leave me recommendations, and the other reason is Entourage is coming on soon, so I need to get off the computer!

Thomas and Betts (TNB): Buy on Valuation, Technicals, and Seasonality

Thomas and Betts (TNB) is trading 10.75X earnings, 0.95X sales, 3.88X cash value, and 8.6X free cash flow with a $1.8B market cap. Shares were raised to Outperform at Wells Fargo on June 1st and are down around 12% since then, likely on concerns over residential construction.

However, shares have become a value play and the chart sets up well here as shares re-test a prior bottom and breakout level around $33, setting up for a bounce with shares extremely oversold, and the CCI starting to trend higher with bullish divergence.

The Company manufactures heating, ventilation, and Air Conditioning systems. The firm also produces switchgears for Utility companies and other electrical components. With the recent heat wave I came across TNB as a play on the air conditioning systems, and also the Utility industry is looking to upgrade its systems.

The valuation and chart sets up for a solid reward/risk, entering a long around $34 a shares and having a $32.50 stop, with a target move to $38.

10 Charts for Bulls