The Signal Newsletter - Safe Option Strategies · newsletter for the The Signal The Safe Option Strategy Under Armour, Inc. (UA) Bull Call Calendar The Safe Option Strategy BTO Jan16

The Signal

The Safe Option Strategy

Under Armour, Inc. (UA) Bull Call Calendar

The Safe Option Strategy

BTO Jan16 $95.00 Strike Calls - $9.90 Debit STO Oct15 $97.50 Strike Calls – $4.10 Credit Total Debit $5.80 Per Share Max Risk is $5.80 Per share Limit Debit Order of $5.90 to open the trade Target ROI is 25% Max ROI Indeterminable Target time in trade is < 35 days

Trade Explanation of the Bull Call Calendar Spread

Click on the link above to see the definition of the spread trade.

The Signal

The best weekly

newsletter for the

serious options trader.

September 8, 2015

By Safe Option Strategies www.safeoptionstrategies.com

http://www.safeoptionstrategies.com/

Safe Option Strategies LLC. does not advise any buying or selling of any securities nor any derivatives thereof. The information contained in this newsletter is for educational purposes only. Trading securities and options can generate substantial profits and losses. No advice is ever given to buy or sell and any trading with real money is done at the subscribers own potential risk.2

The Signal Company Technical’s

Summary

You are not mistake if you are saying “we did this same trade just over a month ago. We did in fact place the same trade on 7/27, and we closed it several weeks later for 20% + profit. It was a great trade, and we are doing it again.


The Signal

The Primary Exit Plan

The primary exit is for the long call to gain value at a slightly faster pace than the short call does allowing us to

exit the trade for about a 25% profit. We could also allow the short call to simply expire worthless (provided it

stays out of the money between now and expiration). Either of these could happen if we get a steady slow

bullish trend or even a stagnant to only slightly bullish trend. Because the difference in strike prices is less

than the net debit in the trade, being called out at the short call strike price would not be good. We have to

adjust if we feel this is going to happen.

Adjustment for Bearish Trend

If the stock price moves bearish and we begin to lose money on the long calls we could roll the short calls

down in strike price and possibly to a different expiration week or month. This will take in a bigger credit

against the long calls and if repeated two or three time with weekly or monthly options it could make the

trade profitable. With the chosen strike prices and expiration months we would likely roll to weekly short calls,

and down in strike if we saw the stock move below $92.50/share. We could continue to roll down and out

with each expiring short option until we have reached a profit level we want, or a break even if we want to

free the money in this trade up to be used elsewhere in our trading.


The Signal

Trade Updates

HD Put Calendar (8/31) – This trade opened for us where we wanted, moved slightly in the right direction, and then moved the other way. The good news – it’s a calendar spread. We are close to breakeven right now. No changes today. XOM ITM Bear Put (8/17) – If you got filled on last week’s 9/1 adjustment, you’re golden. We did not get filled, so we are trying again tomorrow. If we go off last prices, we are at our max profit. If we looked at worst case bid/ask prices, we are profitable, but barely. We are going to set a limit order to close the trade. A limit credit of $2.50 is unrealistic to get filled at, but $2.40 is not. We will sell to close at the open with a limit credit order of $2.40 per share.

NVDA Bull Put (8/10) – We have not had stock put to us, yet. We are trading above our theoretical break even, so we are not worried about it. No changes today. RHT Bull Call (6/21) – RHT is still in the trend we want. No changes today. CAT Butterfly (6/07) – CAT is well collared and looking good. No changes today.

AAPL Bull Call Calendar (5/18) – Time to exit. AAPL has a new product announcement tomorrow, and we don’t really want to be in a bearish directional trade when they start doing their thing. Since the markets open at 6:30 AM Pacific Time (and no one at AAPL will be up announcing things at that time), we should be able to get out in the morning at pretty close to our close prices today. At the open we will buy to close the trade for about $0.22 to $0.25/share.


The Signal


The Signal

Watch for the Signals

Signals to Watch for in the Upcoming Week

and Why. Economic Reports

Sep 08 Consumer Credit Jul Sep 09 MBA Mortgage Index 09/05 Sep 09 JOLTS - Job Openings Jul Sep 10 Initial Claims 09/05 Sep 10 Continuing Claims 08/29 Sep 10 Export Prices ex-ag. Aug Sep 10 Import Prices ex-oil Aug Sep 10 Wholesale Inventories Jul Sep 10 Natural Gas Inventories 09/05 Sep 10 Crude Inventories 09/05 Sep 11 PPI Aug Sep 11 Core PPI Aug Sep 11 Mich Sentiment Sep Sep 11 Treasury Budget Aug

Watch the Reports

Consumer Credit

Highlights

Consumer credit increased by $19.1 bln in July after increasing by an upwardly revised $27.0 bln (from $20.7 bln) in June. The Briefing.com Consensus expected consumer credit to increase by $18.0 bln.

Key Factors

There are generally large revisions to the consumer credit data. In that vein, there were considerable upward revisions in consumer credit growth in May ($19.7 bln from 16.5 bln) and April ($24.2 bln from

$21.4 bln). Revolving credit increased by $4.3 bln in July, from

$910.3 bln in June to $914.6 bln. That was the fifth consecutive increase in revolving credit.

Nonrevolving credit increased to $2,538.8 bln in July from $2,524.0 bln in June, a gain of $14.8 bln.

Big Picture

Consumer credit has increased by an average of $18.4 bln each month over the past 12 months.

Initial and Continuing Claims

Highlights

The initial claims level increased to 282,000 for the week ending August 29 from a downwardly revised 270,000 (from 271,000) for the week ending August 22. The Briefing.com Consensus expected the initial claims level to increase to 273,000. The continuing claims level decreased to 2.257 mln for the week ending August 22 from a downwardly revised 2.266 mln (from 2.269 mln) for the week ending August 15. The consensus expected the continuing claims level to decrease to 2.261 mln.

Key Factors

This was the first time the initial claims level exceeded 280,000 since the week ending July 11. Despite the increase, the overall trend in claims supports a labor market that is at, or very near, full employment.

Big Picture

The initial claims data remained in-line with the encouraging readings seen for some time now that have seen claims bounded between 250,000 and 300,000. This report will help solidify expectations that nonfarm payrolls will again exceed 200,000 in the August employment report.


The Signal Wholesale Inventories

Highlights

Wholesale inventories increased 0.9% in June after a downwardly revised 0.6% increase (from 0.8%) in May. The Briefing.com Consensus expected wholesale inventories to increase 0.3%.

Key Factors

The BEA assumed that wholesale inventories increased 0.7% in the advance estimate of second quarter GDP. After combining the stronger-than-expected June gain with the downward revision to May inventories, wholesale inventories still came out ahead of what the BEA expected. That should lead to a positive revision to second quarter GDP growth. Wholesale durable goods inventories increased 0.1% in June after a 0.5% increase in May. Gains in automotive (2.0%) offset declines in machinery (-0.5%). Led by a 15.5% increase in farm product inventories and a 3.6% increase in petroleum inventories, nondurable goods inventories rose 2.3% in June after a 1.0% increase in May. Wholesale sales increased 0.1% in June after a 0.2% increase in May. Durable sales declined 1.1% in June, which came mostly as a result of a 2.8% decline in automotive sales. Nondurable sales increased 1.2% on strong demand for farm products (3.6%) and petroleum (3.7%). The inventory-to-sales ratio increased to 1.30 in June from 1.29 in May.

Big Picture

Wholesale inventories are just one component of total business inventories. Manufacturing and retail inventories make up the rest of total business inventories. The market ignores this release and doesn't pay much attention to the full business inventory release that comes a few days later. Improved inventory management in recent years has reduced the economic swings associated with inventories and has helped produce a long-term

downtrend in the inventory-to-sales ratio.

Producer Price Index (PPI)

Highlights

Producer prices increased 0.2% in July after increasing 0.4% in June. The Briefing.com Consensus expected the PPI to increase 0.1%. Excluding food and energy, core prices increased 0.3% for a second consecutive month in July. The consensus expected these prices to increase 0.1%.

Key Factors

Energy prices, which provided the bulk of the gain in June, fell 0.6% in July. While gasoline prices increased 1.5%, that was offset by big declines in the prices of home heating oil (-9.5%), liquefied petroleum (-4.3%), diesel fuel (-2.6%), and residential natural gas (-2.4%). Food prices fell 0.1% in July after increasing 0.6% in June. After several months of large gains due to shortages from bird flu epidemic, egg prices declined 24.8% in July. The entire increase in core prices was the result of a 0.4% increase in services prices. Core goods prices were flat in July after increasing 0.4% in June. Most of the gain in services was attributed to a 9.9% increase in guestroom rental prices. Trade costs increased 0.4% in July, up from a 0.2% increase in June. Excluding food, energy, and trade, producer prices increased 0.2% in July, down from a 0.3% increase in June. Year-over-year, these prices are up only 0.9%. There is unlikely to be a strong acceleration in price growth in the near future. Looking down the producer pipeline, pressures weakened in July. Core processed goods prices for intermediate demand increased only 0.1% in July, down from a 0.2% increase in June. Prices of core unprocessed goods declined 0.5% in July after a 0.3% increase in June. Prices of intermediate services demand increased


The Signal only 0.2% in July, down from a 0.4% increase in June.

Big Picture

There are no pricing pressures down the producer pipeline. This should keep both consumer and producer price growth in check.

Michigan Sentiment

Highlights

The University of Michigan Consumer Sentiment Index was revised down to 91.9 in the final July reading from a preliminary reading of 92.9. The index is down from 93.1 in June. The Briefing.com Consensus expected the Consumer Sentiment Index to be revised up to 93.0.

Key Factors

The move in consumer sentiment was opposite of the trend in the Conference Board's Consumer Confidence Index. That index spiked to 101.5, its highest level since January, from 91.0 in July. It is not unusual for the two sentiment indices to show differing trends. In this case, the Consumer Sentiment Index was likely impacted more by recent down trends in the equity market than the Consumer Confidence Index. Lower gasoline price and improvements in labor market conditions likely offset some weakness from equity. The Current Conditions Index was revised down to 105.1 from 107.1 in the preliminary release. The Expectations Index was revised down to 83.4 from 83.8. The drop in consumer sentiment is unlikely to have much of an impact on consumption trends.

Consumption relies on income growth. As long as the labor market continues to strengthen, consumption growth should naturally follow.

Big Picture

Consumer sentiment has little influence on consumption. As long as payroll levels continue to expand, the resulting income growth should keep consumption gains steady regardless of the monthly ebbs and flows in sentiment.

Treasury Budget

Highlights

The Treasury Budget showed a deficit of $149.2 bln in July, up from a deficit of $94.6 bln in July 2014. The Treasury data are not seasonally adjusted, and the July deficit cannot be compared to the $50.5 bln surplus in May. Key Factors The actual deficit was not much different than the CBO's Treasury Budget forecast of -$149.0 bln that was released a few days ago. Total revenues increased to $225.5 bln in July 2015 from $214.5 bln in July 2014, a gain of $11.0 bln. Total outlays increased by $65.7 bln to $374.7 bln in July 2014 from $309.1 bln in July 2014. Fiscal year-to-date, the deficit is $465.5 bln versus $460.5 bln for the comparable period in FY 2014. Big Picture Raw data available at: www.fiscal.treasury.gov/fsreports/rpt/mthTreasStmt/current.htm

http://www.fiscal.treasury.gov/fsreports/rpt/mthTreasStmt/current.htm

http://www.fiscal.treasury.gov/fsreports/rpt/mthTreasStmt/current.htm


The Signal

The Watch List

Symbol Earnings RHT 9/16 ADBE 9/17 MON 9/24 NKE 9/24 TSLA 9/29 COST 9/30 WBA 10/9 EBAY 10/14 NFLX 10/15 AAPL 10/21 BA 10/21 BIDU 10/22 SNDK 10/22 UA 10/22 V 10/22 CAT 10/23 P 10/23 SBUX 10/23 F 10/28 GRMN 10/28 VLO 10/28 FB 10/29 XOM 10/29 CVX 10/30 FSLR 11/3 DIS 11/4 TM 11/6 HD 11/18 DE 11/22 BBY 11/24 SWHC 11/24


The Signal The Bull Call Calendar Spread

A debit spread, the bull call calendar uses a long and a short call in different months of expiration. The long call is placed at, or very near the money (traditionally just out of the money, but whether in, or out, does not matter) and is the primary or money making option. A short call is then placed one or more strike prices higher and with a shorter expiration date and is the secondary or hedging option. The idea is that any bullish move, even if slow, will increase the value of the long option faster than the value of the short option. As the long option moves closer to, or deeper into the money, the delta moves closer to 1.0 while the short option is lagging behind and therefore not gaining value as fast. A good target ROI on most bull call calendar spreads is 20% - 30% and a good target time in the trade is 45 days or less. The expiration date of the options can be as near or far term as desired, so long as they are different dates for the long and short call, but to preserve the ability to adjust the trade, 45-60 days is a minimum recommendation for the expiration of the long call unless using weekly options. Then a shorter expiration date could still be effective.

Documents

The Signal Newsletter - Safe Option Strategies · newsletter for the The Signal The Safe Option Strategy Under Armour, Inc. (UA) Bull Call Calendar The Safe Option Strategy BTO Jan16