Friday joins a pair of dithering dojis to make it another shutout for financial sports fans on more of the same, mixed and lighter data. As of 11:55 ET the SP-500 (SPY) is off 0.20% in narrow and inside conditions as investors play outside and elsewhere in quiet summer trade.
“Extra! Extra! Read all about it!” In more than a few financial rags, Friday’s big story is China’s wide trade surplus miss with exports rising just 1%. Compared to forecasts of 8%, the report managed to jolt a few premarket algorithms into the bear camp before the reigning champion bulls were once more "stimulated" into action to defend that important line in the turf known as the 1400 level on increased monetary action optimism.
Intraday and in those intertwined markets of influence, the EUR/USD has bullied its series of lower lows of the past four sessions into a potential reversal candle. With a modest gain of 0.10%, a developing daily hammer has held the key 50% retracement level and test of channel support from its late July lows to recent highs.
German, Italian and Spanish listed country ETFs (EWG, EWI and EWP) are under very modest pressure. Greece (GREK) is making a slightly more deliberate offensive move of 2.0%, while a newcomer to this type of financial sport and capturing a few wallets is none other than England’s storied Manchester United (MANU) football club.
Manchester United, the world’s most valuable sports franchise (sorry, Yankee fans) are being welcomed by stateside and foreign investors with a cautious show of support. Shares of MANU are currently trading up just a couple pennies at 14.02 after the company sold 16.7M shares priced at $14 but below a targeted range of $16 - $20. The offering raised $233M and values the franchise at $2.3B.
Elsewhere, investors are trying to suggest the show must go on as the VIX ($VIX) trades off 1.25%. Friday’s pressure has the sentiment gauge narrowly below its July lows near 15% and still roughly 10% below its mean-reverting 10SMA as bulls confidently squeeze a bit of weekend time decay out of lowly premium readings.
And as investors confidently strut around the closely-watched 1400 level in the SP-500, the iShares Bull ETF (AAPL) is attempting to wow ‘da Bulls with its tightly-woven handle. With AAPL matching the broader market’s ennui with a slip of 0.15%, shares are establishing a fourth day of inside candle construction built off Monday’s key pivot high and within 3.5% of its all-time-highs as part of a four-month corrective base.
Finally and in those sometimes accurate heat-seeking option markets, J.C. Penney (JCP) is seeing its calls and puts get pulled off the rack on heavy trading of nearly 100,000 contracts as premiums put together a volatility crush in Friday’s session. Shares of JCP are up 6.0% in volatile conditions following a disappointing earnings report which turned much less aggravating after investors learned the company’s larger-than-forecast quarterly loss and sales miss only contained one month’s worth of its new pricing and marketing initiatives.
Pricing of last night's ATM AugWk2 22 straddle for $2.92 per spread and 300% IV has resolved itself into positioned long or short call worth $1.60. With no adjustments made, the buyer of the straddle has a fairly steep loss of $1.32 on their hands. However, given shares of JCP traded down as much as 8% and towards 20 in the premarket, while seeing intraday highs of more than 24.50; the P & L reality could be a much more enjoyable one too.
By buying shares on weakness this morning to flatten the straddle's short delta count and then scalping out of long deltas courtesy of the initial adjustment and the spread's long curvature as shares moved back up and through the strike; the trader could easily have made stock scalp profits much larger than today's straddle value loss. In a perfect world, we could estimate those net profits to be around $2.50 instead of a loss of $1.32 for the "buy and hope" method.
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