MDM Partners reaches 2.26% Net Profit for it’s sixth month of operation.

For more details do not hesitate to ask our Team…

FX Signals by MDM Partners

by STEPHEN GANDEL

FX Signals by MDM Partners

It’s a long held mantra on Wall Street to buy straw hats in winter. The notion is that you should buy the shares of a company when no body wants them, or when things look their worst. Buy at the low. So based on that logic here’s the question: Is BP’s stock a buy?

Did the markets really think the top kill was going to work? Evidently so — BP shares fell 15% today, to $36.52. But before we declare this the end of BP, let’s put this in perspective: the shares traded as low as $34.06 in March 2009. And over the last three years, BP is down 46%, compared to 30% for the S&P 500 (and Exxon Mobil) and 93% for Citigroup.

The most likely fate for BP at this point isn’t death but rather takeover. There’s been a lot of speculation along those lines, and with BP’s leadership looking even weaker than its stock price, the rest of Big Oil is surely salivating at the prospect of picking BP up without much difficulty.

I don’t think the acquirer would be Exxon. Other than that I do think another oil company could come in and pick up BP assets effectively erasing the reputational risk and making those assets worth a lot more.

I don’t think the acquirer would be Exxon. Other than that I do think another oil company could come in and pick up BP assets effectively erasing the reputational risk and making those assets worth a lot more.

UPDATE: The New York Post has more today on why analysts think BP is a buy:

A number of top oil analysts see BP as a summer bargain, and predict cash flows could jump as much as 30 percent next year. Analysts said that once engineers get a grasp on their new plan to tame the gushing oil, investors could see a quick pop in the share prices of all three oil companies involved in the mess. If the latest fix shows signs of working, “we believe it’s likely that the shares of BP will see a near term move higher,” analyst Pavel Molchanov of Raymond James said in his bullish report yesterday on BP. Also, I missed this earlier, but JP Morgan’s analyst also weighed in on BP pointing to the size of what they think the stock buying opportunity could be:

Struggle to rationalize BP’s extreme share price reaction – JPM says they had originally assumed a total containment cost of $7.2bn (100%, based on 120 days at $60m per day). So far, the costs have averaged $24m per day given 42 days since the tragic loss of well control occurred. BP’s 65% share of their original cost estimate is approximately $5bn including the cost of the two relief wells. The difference between this figure and the relative loss of market value ($37bn) is around $32bn. The firm struggles to believe that litigation settlements, claims payments and punitive damages will rise anywhere close to rationalize the difference ($32bn).

How low will the yield on Treasury bonds go? The new consensus is that yields could continue to drop throughout the summer. I have a story up today on Time.com about the bull market in Treasury bonds. The Wall Street Journal is also on Treasury bonds this morning with a round up of where the different investment banks believe yields are headed. And there is another interesting move in the Treasury market today. For the past few weeks, Treasuries have been moving in the opposite direction of stocks. So the assumption has been that when stocks rebound, Treasury prices will fall. Not today. Stocks are up, and bonds are up. Long live the Treasury rally.

by Daniel James Hayden IV

Tiffany & Co (NYSE: TIF) on Thursday morning released financial results that easily beat Wall Street expectations.

Tiffany & Co reported that its 1st quarter net earningsnet earnings more than doubled to $64.4 million, or 50 cents50 cents per share, up from $24.3 million, or 20 cents per share, a year earlier.

Tiffany & Co also reported that net salesnet sales climbed 22% to $633.6 million, up from $517.6 million.

A poll of analysts conducted by Thomson ReutersThomson Reuters showed an average Wall Street estimate of expected earnings of 37 cents per share.

Tiffany & Co forecast full-year 2010 net earnings from continuing operations of $2.55 to $2.60 per share, on a sales increase of 11%.

MDM Partners reaches 6.41% Gross Profit for it’s second month of operation.

For more details do not hesitate to ask our Team…

by Chris McKhann

Every trade has a life cycle, but some are longer than others. I think of Warren Buffett saying that his preferred holding period is forever. Options, of course, are a decaying asset, so their life cycle is much more clearly defined.

The good options trade is born out of research. That research likely includes fundamental and technical analysis. Because options are shorter term by nature, most traders of them focus on technical analysis.

Research into an options trade should also include looking at volatility data. The implied (A measure of the volatility of the underlying stock. It is determined by using option prices currently in the market.) and historical volatility (The realized volatility over a specified period. It is calculated by determining the average deviation from the average price in the timeframe.) are vital ingredients to judge the probability of a trade ending profitably.

GETTING STARTED

Some trades have their origination in the trader’s own research. Others come from advisors or newsletters. Still others come from specialized options tools, such as tradeMONSTER’s StrategySeek. Regardless, the life of an options trade should begin not with trade execution but with research (see fig.1)

A RECENT TRADE

An example of how an options trade can be adjusted as it evolves is key to understanding the process. On Jan. 8, I bought 10 puts of the SPY S&P 500 SPDR Exchange Traded Fund for $4.80. With SPY above $114—a new high since the crash in September 2008—and the Volatility Index below 19, I felt that some downside protection made sense.

VIX is a measure of the implied volatility of the S&P 500 Index options and thus gives a good proxy for the relative value of those options.

This put buying could be viewed as a hedge against a portfolio of stocks, a holding in SPY itself or just as a bearish play, regardless of whether I was long any stock.

I bought the June options to reduce the time decay that increases exponentially as the options approach expiration. I figured I might want to hold this put for three to four months, so I bought six months out.

ALWAYS KNOW YOUR EXIT

I also had my exit in mind when I entered the trade. I would exit the puts if they lost half of their value, trading down to $2.40. I also had a time stop, as I knew that I did not want to hold the puts during the last month before expiration.

By Jan. 22, SPY had dropped below…

$110, following two sharp days of declines, and VIX had popped up to 28.

I had to make a decision. I could sell my puts for a profit, but I was not sure if the declines were over. I was also not in the position to just make a quick buck. If that had been my intent, then a nearer expiration would have made more money.

BACK TO THE BOOKS

So I returned to do more research. I wanted to take advantage of the pop in volatility, which had the greatest effect on the nearer-term options. I checked StrategySeek, tested some alternatives and decided to sell the March $110 puts against the June puts that I owned as a calendar spread.

I sold the March puts for $3.95. Now my timing was not the best in terms of the decline. SPY traded all the way down to $105, and VIX spiked again but did not rise much higher than where I had sold.

End of Part 1

To be continue…

by MDM Partners

Before the bell store operator Macy’s is trading lower at $23.45 or down 1.8% since yesterday close despite the company said it will register profit for the first three months. MDM Partners is expecting the price to fluctuate in the range of $22-$26 and we are going to make a covered call for this stock – May call with strike $22.00.

Department store operator Macy’s Inc. (M) on Wednesday said it swung to a fiscal first-quarter profit of $23 million, or 5 cents a share, from a loss of $88 million, or 21 cents, a year earlier. Sales in the quarter ended May 1 rose to $5.57 billion from $5.2 billion. The company said the most recent quarterly result included $27 million in premium and fees related to debt repurchase. Analysts, on average, estimated the company to earn 4.6 cents a share on sales of $5.54 billion, according to Thomson Reuters. Macy’s said it’s “premature” to raise annual profit forecast further at this time given the macro-economic uncertainty. It had already increased its full-year outlook in late April.

See later our update on Macy’s…

by ETFguide.com

For much of the year, stock market volatility has been quiet and almost non-existent. But Europe’s ongoing financial crisis has triggered a massive surge in volatility.

Last week the Dow Jones Industrials (NYSEArca: DIA) recorded a 1,000 point intra-day fall. Other market global barometers like the MSCI EAFE index (NYSEArca: VEA) and emerging markets (NYSEArca: VWO) followed suit. As fear gripped the market, the VIX (Chicago Options: ^VIX) surged.

Contrary to popular opinion, volatility isn’t necessarily bad. In fact, some investors and traders are profiting from it. Let’s analyze three ways to ride the volatility wave.

Selling Options

Options are contracts that allow investors to go long (calls) or go short (puts) on securities. Instead of buying shares of a stock or ETF outright, a call or put option on the underlying security can be purchased at a fraction of the price. This gives the investor leverage because they’re controlling shares of a stock or ETF for a certain period of time in exchange for a premium payment. A bullish investor would buy calls whereas bearish investors would purchase puts.

Another way to think about options is as a form of insurance. When is the cost of insurance or your premium payments usually the most expensive? It’s when the threat of losses is high.

Similarly, the cost of insurance or options premiums are more expensive when market volatility is high, like it is right now. Put another way, selling options to collect high options premiums is one way to ride the volatility wave.

Leveraged ETFs

Buying leveraged long/short ETFs are another way to play rising market volatility. These types of ETFs attempt to magnify the daily gains of their underlying benchmarks usually by 200 or 300 percent. So long as you’re OK with market volatility, leveraged long/short ETFs can usually get the job done, regardless of whether you’re bullish or bearish.

The ProShares UltraShort S&P 500 ETF (NYSEArca: SDS), for example, attempts to double the daily opposite performance of the S&P 500. If the S&P 500 declines by one percent on any given day, SDS should theoretically rise by 2 percent.

Funds like the Direxion Daily Large Cap Bull 3x Shares (NYSEArca: BGU) aim for triple daily performance of large cap stocks. If large cap stocks rise by one percent on a certain day, BGU should record a three percent gain.

Play the VIX

The VIX indicator has become a popular gauge of investor fear and complacency. A high VIX reading signals fear whereas a low reading means increasing risk appetite among investors. How does the VIX work? By using a weighted blend of various S&P index options, the VIX attempts to estimate the implied volatility for the S&P 500 over the next 30 days. After recently touching 52-week lows, the VIX spiked and now sits around 30.13.

Another way to ride the volatility wave is through the iPath S&P 500 VIX Short-Term Futures ETN (NYSEArca: VXX) which is linked to the S&P 500 VIX Short-Term Futures Index. VXX offers exposure to a daily rolling long position in the first and second month VIX futures contracts and reflects the implied volatility of the S&P 500 Index at various points along the volatility forward curve. The index futures roll continuously throughout each month from the first month VIX futures contract into the second month VIX futures contract.

One caveat about VXX and all ETNs: They carry credit risk just like bond investments. Therefore, anyone investing in VXX would do well to closely monitor Barclays Bank’s credit situation. If it suddenly changes for the worse, it may be time to bail.

Conclusion

The EU’s $1 trillion plan to backstop the euro dollar (NYSEArca: FXE) has already been heralded by some observers as the panacea for Europe’s problems. Others have their doubts.

So as bulls and bears debate about what this means for the future of world markets, one thing we can all probably agree on is that chaos and volatility is here to stay.

by MDM Partners

MDM Partners has a May long call option in SDS and gained almost 300% from it’s bet. The german people vote against the greek bailout, now that’s all in quesiton again. Remember 2008 when hedge funds were liquidating their positions to raise cash? It was always sell on the rally, so that they could get a better price. Same thing happened on friday. Same thing will happen on Monday. Plus you have the mutual funds coming in with the selling pressure.

Mutual funds had the lowest % of cash in decades at around 3-4%…the only buyers this will will be the PPT and day traders should trying to get the 10% bounce from QCOM.

Stay in touch with our latest news on the financial markets and you may flow with current wave like us…

by MDM Partners

We bought yesterday SDS May Call option with strike $33.00. MDM Partners is bullish of this “market short fund”. The correction that is comming should begin somewhere in a very near term by the end of this month or the beginning of June. Stay in touch with our view and will gain with us.

If the market is being manipulated as so many post, than wouldn’t we need to see a rally from here. Perhaps to new highs? We don’t think this administration can afford to have a collapsing market as then health care and cap and tax would be seriously in question and Obama in the White House 2012 not likely.

We think they need to show that the markets are healthy and can recover from these “hiccups”. In a few days they will be saying that this was a much needed correction that healthy bull markets need everyonce in a while. But who knows?

More news for our new position during the weekend…

by MDM Partners

MDM Partners continues to monitor closely TICC as the company showed yesterday better than expected results for the first quarter. We are still expecting target of $9.00 and we hold May long call with strike $7.50.

For the quarter ended March 31, 2010, TICC recorded net investment income of approximately $4.6 million, or approximately $0.17 per share, net unrealized appreciation on investments of approximately $44.5 million and net realized losses on investments of approximately $31.1 million. In total, they had a net increase in net assets resulting from operations of approximately $0.67 per share for the first quarter.

Total investment income for the first quarter of 2010 amounted to approximately $6.6 million, up approximately 28.0% from the first quarter of 2009 due largely to a higher return on our investment portfolio and distribution income from our securitization vehicles.

At March 31, 2010, net asset value per share was $8.87 compared with the net asset value per share at March 31, 2009 of $7.46 and at December 31, 2009 of $8.36.

Further info to come…