Money hungry this upcoming week? Looking for a quick up or downside? Here's four volatile situations for potential plays that you can take positions in first thing this week.
1. Netflix (NFLX) (strategy risk : aggressive/high risk) -- Netflix traded up a total of almost 65% last week after they released much better than expected earnings. After watching the stock have a second massive rally day after the initial 40% spike after earnings, I wrote this article stating my short arguments on the company; based mainly around the idea that mostly buyers panic and hysteria led to the meteoric 65% gain.
As I said in my article, I am short Netflix (at CB $172) now after it's meteoric run and even after it's 4.3% pullback to start the week Monday.
For equity traders, if you're long NFLX for the long term, why not scoop up shares here and write covered calls to grab some quick premiums?
For options traders, I like a strangle, because even though I maintain my short position on the company, buying mania and retail idiocy sometimes know no boundaries. Now, more than ever, I'm convinced Netflix is going one direction or another -- quick.
A strangle is a bit more of an aggressive strategy here than playing a straddle, so we're going to do it with options that expire March 16, 2013, giving us lots of time for the fun to take place. This is also a strategy with a serious risk of total loss, but one that could yield massive rewards. For a potential strategy here, (as of PM Monday 1/28) I like March 13 $130 puts for $2.52 and March 13 $185 calls for $10.00. This puts your breakeven point at $117.48 or $197.52.
Should Netflix continue it's freight-train like run and see $225, you'd see almost 400% on your calls. If you wrote covered calls you'd be exercised but will have made a profit of potentially 40%. Should it correct and slump back down to $100 on profit taking or an unknown, you'll be looking at almost 600% on your puts. With lots of time value built in here, this is a play for people that have the itch to gamble.
2. Select Comfort Corporation (SCSS) (strategy risk :moderate/moderate to low) -- Select Comfort was crushed 20% last week on earnings and guidance misses which came directly on the heels of TemperPedic impressing with their results.
For equity traders, I love picking up shares here after it's continued, but smaller plummet today. SCSS is due for a bounce this week which is why this investor would consider picking up shares this week.
For options traders, I'm looking at playing a $22.50 March 13' straddle.Calls are $1.75 and puts are $1.05, which puts your breakeven at $25.30 or $19.70. As I see it here, straddlers will also have a chance to possibly cash both of these positions, as I see a possibility of a bounce this week putting SCSS near $25 before it begins to tail off heading into its current quarter. Profit take on the calls if the stock bounces this week, sell off and then ride the puts as close as expiration as you need to to cash or cut losses on your premium.
3. Apple (AAPL) (strategy risk : moderate/moderate) -- Volatility and emotion have never been more pronounced than in this past week following earnings. The stock is trading consistently well above it's 22 day and 100 day averages; the blogs and analysts are screaming bearish and bullish arguments at each other moreso than pre-earnings, showing that the war over Apple is still waging on.
For equity traders, I like buying Apple shares long here with dividends coming up on 2/7/13 to the tune of $2.65/share. It's never been a better time to pick up cheap shares of Apple that you can write contracts against.
For options traders, I like a straddle with plenty of time value built in. Consider the March 13 $440 options. Options guru Dr. Terry Allen pointed out this strategy pre-earnings, but I think it holds value post-earnings as well. As of 1/28 pre-market, $440 puts are trading at $20.30 and calls are trading at $18.85. This puts your breakeven points at $479.15 and $400.85 with about seven weeks of trading to go. This is a great opportunity to pocket from both sides of this straddle due to the fact that Apple is heavily covered and moves quickly on news. (see: iPhone 5 supplier orders cut news before earnings that moved Apple down 6%).
4. Celsion (CLSN) (strategy/risk : aggressive/high risk) -- Celsion has a massive binary event coming down the pipe this week; they are due to release Phase III data results of their ThermoDox treatment for liver cancer. Although Celsion appeared to take a step in the direction of good news earlier this week, investors have still not been privy to any of the Phase III data that is going to, in this investors opinion,make or break the company as a whole.
We know from speaking to Celsion IR over the past couple of weeks that they're confirming their January release date for the data, and with only four trading days left in January, we're due to see some major action in Celsion stock.
It is time to stake your position accordingly, as there's only 4 days left in January for Celsion to release their results.
What does this mean for traders? It means the implied volatility on the stock is massive (as are the option premiums accordingly), but with this being either a total success for the company as a whole or total implosion for the company as a whole, we can expect the $7 price tag on Celsion stock to not last through the end of this upcoming week. This investor thinks that price targets of either $1 or $20 depending on the news are not too farfetched.
For Celsion, no need to look at pricey March options, as this data will be made available before February. I'm looking at a February strangleusing $4 puts that cost an astronomical $1.25 and $11 calls that cost $1.75. Immediately, you'd think that the premiums are insanely too expensive to play, but you have to remember the fate of the entire company is on the line here -- this is going to be a fountain of volatility in the coming weeks.
This strategy puts your breakeven points at $1 and $14, respectively. If the data is positive and CLSN sees $25 (which is conservative, in my opinion), you'd be looking at about 750% on your calls. Should the data fail to impress and the stock tank to it's pre-ThermoDox success levels of $1, you'll be able to take your money off the table.
Whatever strategy you decide to play, remember that volatility is the catalyst that makes the market the adrenaline rush that it is. I wish you all the best of luck.
Disclosure: I am long CLSN.
Additional disclosure: I own CLSN puts and calls.