Did you notice the large trade of the Jan 2016, 12.5 calls on Friday? If that was a buy to open trade, the open interest would now be over 60k for that one option. Someone is making a large bet that ARCP is going to have a big recovery in 2015.
Take a look at an expanded chart for USO during the 2008-2009 decline. The comparison between then and now is interesting.
The peaks were on 7-11-2008 and 6-20-2014
The earlier decline formed a H&S bottom. The first shoulder low was on 12-26-2008.and the second shoulder low on 4-21-2009, 4 months apart.
Maybe this will play out with a similar scenario.
The WSJ article today said a trader sold nearly 40,000 of the Jan 2016 12.5 calls this morning at the bid price of 0.30
Although not entirely clear, the article implied that this was a sell to open trade, meaning the trader was bearish on ARCP.
I find it hard to believe that someone would do this as a bearish trade. Too much risk for such a small profit.
But we will know tomorrow morning. If the open interest is over 60k, then it was a STO. Around 40k means a STC.
Is there any way we could find out who the counterparty was to these option trades?
It would also be interesting to see the terms of the option trade. There is probably no secondary market for these over the counter calls and pricing would be difficult. Can you imagine the counterparty having to deliver 55+ million shares should Corvex decide to exercise these calls.
Have you noticed that today's low is exactly the same as Wed's low. A lot of technical trading going on.
Perhaps more significant is the recent tendency to fill the opening gap down. Whether this is new buying or short covering, the buyers appear to be coming in. Maybe a short term bottom is being formed.
I took another look at their prospectus. The shares will be redeemed after an acceleration event occurs. It is not clear what such an event would be, but this would appear to be better than just closing down and leaving the shareholders with nothing.
For now, the way to play this could be to just day trade the opening gap down, since this ETN is intended only for single day trades. It seems that there are now more traders coming in to play the long side. Maybe start accumulating shares when oil is in the mid 40s.
Roll Dates are the expected dates on which the composition of the Benchmark Futures Contract is changed or ''rolled'' by selling the near month contract and buying the next month contract. The change occurs over four days.
In February 2009 after it had bottomed to around 35, crude then rose 7.4 percent while USO fell 7.4 percent.
This is from the article: "Is “Contango” Affecting Your ETF Performance?"
As the price of oil begin to rally, the spread between the futures prices and the cash price will begin to widen in anticipation of higher future prices. This in turn will cause the contango effect to become worse for each roll of the contracts.
With PVA at 5.72, the June 5.00 put could be sold short for around 1.00
Think of this strategy as buying a very high dividend stock or even a bond. The effective annual yield would be 40%. In the event that the shares are "put" to you, your effective cost per share would be 4.00
Joe Terranova is long VXX, AAPL, COG, and MCK
This seems to be a balanced portfolio. He is in AAPL for the earnings play. He was not clear about VXX. Maybe he is expecting more volatility.
Could be nice if this ends up being another double bottom.
What does it actually mean when an oil co. says their cost is $90? Does this include an amortized cost of the actual rig? Once a rig has been constructed and is operational, what would be the actual operational cost to extract each barrel of oil (ignoring the actual cost of the rig)?
The reason I had asked is because of this info from Wikipedia.
"Oil wells are generally classified as stripper or marginal wells when they produce ten barrels per day or less for any twelve-month period. In the United States of America, one out of every six barrels of crude oil produced comes from a marginal oil well, and over 85 percent of the total number of U.S. oil wells are now classified as such. There are over 420,000 of these wells in the United States, and together they produce nearly 915,000 barrels (145,500 m3) of oil per day, 18 percent of U.S. production."
An alternative to owning shares or options on USO. Only if you are ready to go long oil.
This article "The Battle Between WTI and Brent - Why the Oil Price “Spread” is Getting Tighter" explains the significance of the spread.
With GILD at 97.21, consider the Feb 90/100 call spread for a debit of around 5.45 ($545).
You will be paying nothing for time premium and actually gaining intrinsic value, giving you an effective cost per share of 95.45. Looking at the Head & Shoulders pattern, this would provide you with a good risk/reward play.
Looking at the 6 month chart, PVA is now near the top of the descending channel. Unless there is a rally in oil, what would be the possibility of PVA breaking out of this channel.