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Unusual Options Activity: Tesla Motors (TSLA)

Posted: 16 Jul 2019 03:00 AM PDT

Multiple options trades imply shares will decline again.

Multiple bets are being made that shares of Tesla Motors (TSLA) will drop again in the coming weeks.

On Monday, over 10,000 contracts traded on an August $60.00 put—a 75 percent discount from where shares trade around $240. Another large trade occurred on the October $215 put, which implies a 10 percent discount between now and October.

The August put, trading at $0.04, or $4 per contract, is a very cheap bet likely to expire worthless. But if Tesla shares drop quickly at some point in the next 31 days, the option could get a large percentage bounce.

The October put options, which expire in 94 days, traded for around $12.68, or $1,268 per contract. They may have a smaller percentage move, but investors could still make a quick profit if shares drop heavily in the coming days.

Action to take: Tesla Motors has surprised on the upside lately on record deliveries. Given how those deliveries occurred from an increase in lower-end production however, and how sensitive the stock is during market selloffs, the October $215 trade looks like an attractive bet as a short-term market hedge.

Traders should look at the October $215 options, provided they don't pay over $12.90 for the option. Traders should look to take a quick 20-30 percent profit before the time premium starts to work heavily against the trade.

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Chinese Economic Growth Slumps to 30-Year Lows

Posted: 16 Jul 2019 03:00 AM PDT

Trade war uncertainty impacts growth rates in China.

On Monday, Chinese economic data indicated that the second quarter of 2019 was the slowest the country has grown in more than 27 years. At current rates, China will "only" grow at an annualized 6.2 percent, as measured by Gross Domestic Product.

The number was slightly lower than the first quarter, and consequently indicates an increased likelihood of a sustained slowdown.

China is expected to ramp up stimulus measures to combat the slowing growth, but most signs are that the main culprit is trade. The ongoing U.S.-China trade war has led to a shift in international production away from China and towards other countries with lower tariff rates.

Some, including President Trump, see a higher likelihood that this trade-based slowdown will lead to a faster resolution on trade issues that are favorable to both countries.

While the slowdown was expected, other factors such as retail sales, industrial output, and fixed investment have shown modest increases. Overall, China continues to pursue a policy of heavy exports, a loose monetary policy to give it an edge with trading partners, and industrial policies meant to spurn investment.

The state-run economy can thus create goals to double its economy from 2010 levels by 2020 and still remain largely on track to do so, even with recent trade war uncertainty weighing on growth.

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Tropical Storm Barry Could Lead to Higher Food Prices as Midwest Floods

Posted: 16 Jul 2019 03:00 AM PDT

Midwest adds Barry to a year full of high rainfall and flooding.

Although Tropical Storm Barry fortunately failed to strengthen to a hurricane before making landfall over the weekend, the powerful storm system is now moving northward up the Mississippi River area, adding to a region already dealing with high levels of rainfall and flooding this year.

Consequently, the already impacted spring planting season may be ruined, and a surprising number of food shortages could develop as a result.

Already, tens of millions of acres of farmland already laid fallow this year, as heavy winter snowfall and spring rains led to a missed planting season.

More marginal areas have struggled from too much precipitation, and without warmer, sunny weather, crop production is on track to be its lowest in years. The largest crop for middle America, corn, is likely to miss expectations heavily this year.

Action to take: While commodity prices in the agricultural space can be volatile, investors could play this likely trend over the next few weeks and months with a fund like the Invesco DB Agriculture fund (DBA).

The fund tracks major agricultural crops such as corn, soybeans, cattle and sugar, and could serve as a hedge against rising food prices in coming weeks and months as more information about fall harvests gets closer.

Insider Activity: G-III Apparel Group (GIII)

Posted: 16 Jul 2019 03:00 AM PDT

CEO makes million-dollar buy.

On Thursday, G-III Apparel Group CEO Morris Goldfarb bought 40,000 shares of his own company. Besides increasing his total stake to over 3.9 million shares, the $26.47 price per share means he spent over $1.05 million picking up shares of the firm.

This follows on a previous purchase by Goldfarb back on June 13th. Then, he picked up 40,479 shares, paying $1.02 million.

G-III Apparel designs, sources, and markets apparel for men and women. It operates in wholesale and retail operations. The company manufactures under proprietary brand names and licensed names such as Calvin Klein, Tommy Hilfiger, Guess?, Levi's, Docker's and many others.

Besides design work, it operates over 308 leased retail stores, 139 of which are Wilsons Leather stores.

Action to take: Trading at 10 times earnings and with shares trading close to a 52-week low against a high of $50 in the past year, shares look cheap and ready to move higher. The company's 21 percent earnings growth indicates an extremely oversold stock here.

While the company's retail operations are a reason for caution, the company's manufacturing and design work for various brands ensures that it will continue to make a profit no matter what changes occur in fashion trends.

Shares look attractive up to $30.00.
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