Huge Volume Spikes from Egypt & Region (APA, EGPT, AFK, FFD, TUR, TKF, ISL, EIS, GAF)

We won’t bother telling you what has been going on in Egypt. You’ve seen the news and it isn’t pretty with the riots and the protests.  What is standing out is some severe volume spikes in what are otherwise less thought of stocks and trading instruments.

Apache Corp. (NYSE: APA) is down another 1.1% at $115.02 after having been as low as $110.20 today but volume was almost 15 million shares right before the close after having traded 12.8 million shares on Thursday.  Average volume is barely 2.7 million shares.  Apache has 20% to 30% of its gross from the Egypt region.

Market Vectors Egypt Index ETF (NYSE: EGPT) was down 4% at $16.11 on more than 1.1 million shares versus an average volume of only about 30,000 shares.

Market Vectors Africa Index ETF (NYSE: AFK) does have Tunisia exposure but shares were down 4.3% at $32.36 on 190,000 shares versus average volume of only about 37,000 shares.  Another is the Morgan Stanley Frontier Emerging Markets (NYSE: FFD) was down 5.2% at $14.28 on 127,000 shares versus an average volume of only about 20,000 shares.

iShares MSCI Turkey Investable Market Index (NYSE: TUR) and the Turkish Investment Fund Inc. (NYSE: TKF) were both down even worse than Egypt today, more on concerns that Turkey has some similarities of Egypt but they are not tied today.  The TUR was down 6.9% at $58.07 on 720,000 shares versus average volume of less than 400,000 shares. TKF was down 5.6% at $15.10 on 217,000 shares versus an average of less than 50,000 shares.

If you are having trouble in the North African and Middle East regions, then you can’t ignore Israel… The Aberdeen Israel Fund Inc. (NYSE: ISL) was down 4.3% at $16.75 on over 30,000 shares versus an average volume of only about 10,000 shares.  The iShares MSCI Israel Cap Investable Market Index (NYSE: EIS) was down 3.1% at $57.84 on 125,000 shares versus an average volume of only 54,000 shares.

The SPDR S&P Emerging Middle East & Africa (NYSE: GAF) was down almost 5% at $68.62 on more than 100,000 shares versus an average daily volume of under 35,000 shares.

This doesn’t even take into consideration the shippers and other secondary and tertiary players in the region.

JON C. OGG
3:44 PM EST

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Increased Put Options Review Before Earnings (CRM, VMW, JNPR, NFLX, AMZN)

An article in Barron’s this weekend against Salesforce.com (NYSE: CRM) and the risks associated with chasing its 100-times forward earnings multiple is adding some weight on the shares of several key high-flying tech shares ahead of this week’s earnings.

Virtualization leader VMware Inc. (NYSE: VMW) is reporting earnings after the close on Monday and Thomson Reuters has estimates of $0.44 EPS and $803.54 million in revenues; for the next quarter estimates are $0.41 EPS and $783.7 million in revenues.  The 52-week range is $41.30 to $97.61.  The F5 Networks news took away some oomph from the stock here an dthis still trades at more than 50-times DEC-2011 fiscal earnings estimates.  Shortly after 2:00 PM EST we have seen more than twice as many PUTS as CALLS trade in the FEB11 options expiration.  Over 8,000 contracts traded on the PUTS.  The breakeven for speculative PUTS at the $85 strike: over $7.00 lower from the price of $88.79.

Networking player Juniper Networks Inc. (NASDAQ: JNPR) is due with earnings on Tuesday and Thomson Reuters has estimates of $0.37 EPS and $1.12 billion in revenues; for the next quarter estimates are $0.34 EPS and $1.09 billion in revenues. Its 52-week range is $22.25 to $38.73 and shares were at $30.54 about 90 days ago.  At $34.83, the breakeven to the closest speculative FEB11 PUT is a drop of more than $2.70 or an implied price of $31.30 or less.  As earnings will come tomorrow, look for options trading to be more precise Tuesday over Monday.

Home video delivery leader Netflix Inc. (NASDAQ: NFLX) is due to report earnings Wednesday and  Thomson Reuters has estimates of $0.71 EPS and $597.23 million in revenues; for the next quarter estimates are $0.88 EPS and $670.98 million in revenues.  Shares were at $194.84 just on January 18 and hit a high of $209.24 on December 1.  This was just about $150.00 about 90-days ago.  The outlook will make the difference here more than just the past.  Netflix is seeing more speculative PUT volume tahn it is CALL volume.   AT $182.00, the breakeven in PUTS would call for the stock to fall under $173.00 for the PUT option to pay off… In short, it requires a $9.00 drop to be profitable.

On Thursday comes the earnings from Jeff Bezos and firends at Amazon.com Inc. (NASDAQ: AMZN). Thomson Reuters has estimates of $0.88 EPS and $12.98 billion in revenues; for the next quarter estimates are $0.76 EPS and $9.3 billion in revenues.  Shares recently peaked out at $191.60 before everyone saw the writing on the wall elsewhere at other hi-beta and high-flying tech stocks.  The 52-week trading range is $105.80 to $191.60 and it is going to take much more than the Kindle to justify a 52-times earnings multiple for its DEC-2011 consensus estimates. We will hold off on analyzing PUTS in Amazon until Thursday gets closer because the BEB11 actions is showing more CALLS volume by far then in PUTS.  That may be due to the Bank of America Merrill Lynch call this morning reiterating Buy and a $198 target but it may just be that there is still more than three full trading sessions before it reports earnings.  On a guess today, speculative PUT buyers would have to see a dr op of close to $7.00 with shares at $177.30.  That would put the breakeven close to $170.00.

Stay tuned.  This week will be key for many of these high flying hi-beta stocks.

JON OGG

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Option Expiration’s Largest Open Interest Contracts (GE, MSFT, PFE, INTC, YHOO, CSCO, WFC, SPY, QQQQ, FXI, XLK, XHB)

Today marks the January 2011 options expiration date. There are many active options expiring, and the reason these are so large is because many are LEAPS rather than just normal monthly options.  The old rule of thumb is that options tend to drift toward their closest and most active options contract strike prices.  We identified the largest contracts with the highest open interest. These are all in major players and in major ETFs after that.

General Electric Co. (NYSE: GE) JAN11 $20 Call has 234,732 contracts; JAN11 $19 Call has 209,801 contracts; Share price at 11:30 $19.46.

Microsoft Corporation (NASDAQ: MSFT) JAN11 $30 Call 210,520 contracts; MSFT $27.50 Call 162,676 contracts…. Share price at 11:30 $28.10.

Pfizer Inc. (NYSE: PFE) JAN11 $17.50 Call… 186,517 contracts; JAN11 $20 Call… 192,992 contracts; Share price at 11:30 $18.25.

Intel Corporation JAN11 $22.50 Call has 186,623 contracts; JAN11 $21.00 Call has 164,583 contracts… Share price at 11:30 $20.90.

Yahoo! Inc. (NASDAQ: YHOO) JAN11 $17.50 Call has 161,010 contracts; Share price at 11:30 $16.01.

Cisco Systems, Inc. (NASDAQ: CSCO) JAN11 $19 Put has 142,583 contracts and the $20 Put has 136.060 contracts; Share price at 11:30 $20.78.

Wells Fargo & Co. (NYSE: WFC) JAN11 $30 Call… 104,257 contracts; Share price at 11:30 $32.49 so look at the $32.50: Call has 67,906 contracts and Put has 42,812 contracts.

In ETFs:

SPDR S&P 500 (NYSE: SPY) JAN11 $125 Put has 358,490 contracts; Share price at 11:30 $128.74.

PowerShares QQQ (NASDAQ: QQQQ) JAN11 $54 Put has 217,276 contracts; Share price at 11:30 $56.04.

iShares FTSE China 25 Index Fund (NYSE: FXI) JAN11 $40 Call has 138,131 contracts and teh $40 Put has 136,096 contracts; Share price at 11:30 $43.45, so other strike prices matter more.

Technology Select Sector SPDR (NYSE: XLK) JAN11 $26 Call… 132,322 contracts; Share price at 11:30 $25.86.

JON C. OGG

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Intel Pre-Earnings Options Analysis (INTC)

Intel Corporation (NASDAQ: INTC) is due with earnings Thursday after the close and we could not help but notice two key issues around the options trading in Intel.  First was that the volatility is much lower and the options market is not expecting a huge price move from earnings.  Second would be that the bias remains much more skewed to a bullish bias.

The CALL options trading was far more active with more than 85,000 of the JAN11 CALLS traded versus less than 40,000 of the JAN11 PUTS traded.

Shares closed up 1.2% at $21.30 Wednesday and the 52-week trading range is $17.60 to $24.37. The bias is bullish going into earnings as far as the options are concerned and frankly the volatility here loos lower than normal as we’d assign a mere $0.50 to $0.60 expected move based upon the closing price of the closest PUTS and CALLS.

Stay tuned, maybe those figures and expectations will widen out a tad on Thursday since that is the actual earnings date.

JON C. OGG

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Gold Options Showing Major Price Swings Coming (GLD)

The five straight days of lower prices in the SPDR Gold Shares (NYSE: GLD) comes with an interesting twist.  This week we saw elevated options trading when you consider that only one single day of the last week was above its average daily volume.  A fight appears to be more than just starting to brew.

On Friday, in the JAN11 CALLS there were nearly 45,000 combined Call option contracts versus close to 36,000 of the combined put options traded.

JAN12 $115.00 CALLS closed at $23,30 but there were 10,007 contracts traded on Friday versus a prior open interest of only 17,569 contracts.  Likely many were closed out, but we’ll know Monday.  In the JAN12 $130.00 PUTS after a $10.05 close we saw 7,110 contracts trade versus an open interest of 20,656 contracts.  Even out in the JAN13 CALLS there were a combined number of nearly 5,000 contracts which traded in the out of the money CALL strikes.

To show how crowded the gold trade is now, the $135 JAN13 CALL is the closest strike price.  Its last trade was $19.41 on Friday.  That implies that the GLD has to rise another $20.00 per share and that gold has to rise to close to $200 more per ounce by the third Friday in January of 2013 for that to break-even.

Our technical analysis affiliate is Adam Hewison of INO and he has spot gold looking oversold with $1,362 an ounce as the next support to watch.  We’d also note that S&P gave a $1,600.00 per ounce target by the end of 2011.
The other big call on energy and materials was where S&P surmised that gold would finish 2011 around the $1,600.00.  If that holds true, then $158 to $159 is what you’d expect on SPDR Gold Shares (NYSE: GLD).

Watch gold.  The GLD is not showing the active trading when you consider how much gold has pulled back.  The GDL fell to $133.58 after having closed out 2010 just a week ago at $138.72.  That is a drop of about 3.7%.  For whatever it is worth, the GLD also broke through the 50-day moving average and stayed there for the first time in months.

What is being set up will sound greatly simplified.  Unfortunately that is the way things are sometimes.  Gold is going to try to test much lower levels or we are about to see an explosive move higher.

JON C. OGG

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Atheros Circuit Breaker.. On Qualcomm Deal (ATHR, QCOM)

Atheros Communications Inc. (NASDAQ: ATHR) has been halted after a price-volume spike took shares through the roof.  Reports are out that QUALCOMM Incorporated (NASDAQ: QCOM) is in a deal to acquire Atheros for about $45.00 per share.  Atheros develops semiconductor system solutions for communication products from personal to enterprise access levels.

The New York Times’ DealBook just reported on it.

Atheros was already up over the last 3 months but shares are back to trading around $43.50 on more than 4 million shares as of 3:12 PM EST… a gai of about 17.5%.

Jon Ogg

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