Seeking Alpha

Brian Gorban's  Instablog

Brian Gorban
Send Message
Brian Gorban has been an active investor for almost twenty years. Mr. Gorban is a graduate from the University of California, Berkeley in 2005 with a degree in Economics and minor in Business Administration from the Haas School of Business (Finance Focus). Upon his graduation, he worked as an... More
My blog:
Financial blog/advice
  • Look at the Options Activity here before making your trade 0 comments
    Nov 9, 2011 8:55 PM | about stocks: MSFT, C, MMM, JNS, JEF
     There are many indicators I use when analyzing a stock. One indicator I look for are relatively cheap dividend stocks. Another strong indicator is insider activity in stocks, such as the ones described here. Finally, another indicator is looking at unusual option activity, as I recently brought up here, while some on Nov. 9 caught my eye below. Again, unusual option activity always catches my attention since options are generally a strong indicator to future movement as they provide great leverage for an investor.

    Microsoft (MSFT) develops, licenses, and supports a range of software products and services for various computing devices worldwide. It had abnormal options activity again on Nov. 9, after I recently wrote about it here, with the Nov 27 having a massive 52,307 contracts trading hands.  The contracts were not being bought aggressively though so I wouldn't say this is bullish, however the fundamentals of MSFT still remain strong at trailing 9.5x P/E, forward 8.5x P/E, .8x PEG, over $40B in net cash, and 3.1% dividend.  I think with such a nice yield, MSFT is great as a covered call with the Jan 2013 27 selling for a nice $2.40 premium, while you collect the dividend.

    Citigroup (C), a global financial services company, provides consumers, corporations, governments, and institutions with a range of financial products and services.  The stock got hammered over 8% on Nov. 9 and there was particularly strong volume on Nov. 9 in the Nov 34 trading 13,782 contracts against only 14,704 in open interest.  The contracts weren't being bought aggressively so I wouldn't see it as bullish, moreover I don't see a strong catalyst for C to shoot up 20% by Nov. 18 as these contracts are betting on.  I think if one is bullish on C, the Jan 34 puts selling at $6.40 allow you to take advantage of these sizeable premiums while benefiting if C were to rise from here.

    3M Company (MMM), together with subsidiaries, operates as a diversified technology company worldwide.   There was strong volume on Nov. 9 in the Nov 82.5 calls trading 5,510 contracts against just 4,020 in open interest and the Nov 80 puts had 8,783 contracts trading higher against only 2,226 in open interest.  I wouldn't make much of this action as it's hard to see and moreover MMM seems to just be a victim of the market sell-off. Moreover, it has great fundamentals at a trailing 13.4x P/E, 12.5x forward P/E, 1x PEG, over $4B in FCF this past year, and respectable 2.8% yield.  I'd look to either have this as a covered call or deep in the money call as I'm more bullish than bearish on MMM.

    Janus Capital Group (JNS) is a publicly owned asset management holding company.  There was a massive 20,183 Dec 6 puts being bought aggresively against only 2,077 in open interest showing strong bearishness on Nov. 9.  The market volatility is most likely a negative for their funds as people tend to withdraw money during these times, and their projected to have declining earnings going from a trailing 6.5x P/E to over 10x.  I think I'd follow this bearishness and look to buy the Dec 6 puts as a hedge if anything against my other long positions.

    Jefferies Group (JEF), together with its subsidiaries, operates as a securities and investment banking company.  There was massive volume in the deep out of the money Dec 6 put options trading over 22,000 contracts on Nov. 9.  JEF has been getting clobbered of late due to their European bond exposure and until that clears, expect more volatility.  I wouldn't be short though as the great investment minds of Leucadia own approximately 30% and definitely have the financial muscle to buyout the remaining 70% if JEF keeps getting cheaper.













    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
    Themes: Options Stocks: MSFT, C, MMM, JNS, JEF
Back To Brian Gorban's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (0)
Track new comments
Be the first to comment
Full index of posts »
Latest Followers

StockTalks

  • Is There Money Still To Be Made In 3D Printing In 2014? http://seekingalpha.com/a/15luj
    Jan 13, 2014
  • What's your top stock for 2014?
    Jan 7, 2014
  • Happy 2014 everyone!
    Jan 2, 2014
More »

Latest Comments


Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.