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Unusual Options Activity: TAL Education Group (TAL)

Posted: 11 Sep 2019 03:00 AM PDT

Straddle trade bets on shares moving sideways in next month.

October 18th $35 call options on TAL Education Group (TAL) saw 6,100 contracts trade, on the same day 6,200 $35 put options traded on the same company for the same strike date.

The overall type of trade looks like a straddle—where the trader is betting on shares to trade around that price. With a cost of around $2.18 for the put and $1.20 for the call, creating the overall position may have cost the trader around $1 per contract.

TAL Education operates a K-12 education company in China, with 676 learning centers, and 499 service centers in 56 cities.

Action to take: The overall option trade looks like a bet that shares of this Chinese company won't be too volatile within the next 37 days. With shares looking pricey at 37 times earnings, but with the company growing revenues by 27 percent year-over-year, we also see mixed data.

Overall, this unusual trade, particularly given its dual nature, is one best observed from the sidelines. Given the volatility in any China-related play, investors looking to make a bet right now can find plenty of other names in the space that could have a bigger move in the coming weeks, whether up or down.

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Jamie Dimon Warns on JPMorgan’s Interest Income

Posted: 11 Sep 2019 03:00 AM PDT

CEO lowers estimates by $500 million.

Speaking at the Barclay's Global Financial Services conference, JPMorgan Chase (JPM) CEO Jamie Dimon warned that the bank's 2019 net interest income would be down about $500 million from previous guidance. The bank would still be on track to hit full-year revenue estimates of $57 billion.

Dimon further warned that even lower rates could be worse, as they would cut the bank's net interest income by the billions.

He even stated that the bank is prepping for the possibility of negative interest rates in the United States, a move which would be devastating to anyone relying on the positive income from a fixed-rate investment.

Action to take: We continue to see challenges for the banking sector as a whole, particularly if interest rates drop back to near zero—or even lower. The big banks may be able to offset their declining interest income with trading fees, but smaller banks could see an overall lower bottom line. However, on a valuation basis, the smaller banks offer better value right now, and larger banks appear to be in a market o merge with smaller firms.

Among the big banks, we like JPMorgan in part due to Dimon's astute management skills. With shares around 12 times earnings and a dividend yield north of 3 percent, shares look attractive here, but we don't see a huge upside or downside either way right now that would make for a great speculative trade here.

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Insider Activity: Cigna Group (CI)

Posted: 11 Sep 2019 03:00 AM PDT

President & CEO makes a 32,000 share buy.

Cigna Group (CI) President & CEO David Cordani picked up 32,509 shares recently. The buy increased his stake in shares to over 357,500 shares, and the recent purchase cost just over $5 million.

Insiders at the company have largely been sellers year-to-date, albeit in smaller amounts of a few hundred to a few thousand shares at most. And Cordani recently sold 27,000 shares in March at a price just 6 percent higher.

Cigna Corporation is a health service organization that provides insurance and related products and services around the world.

Action to take: The overall level of insider selling at a company the size of Cigna, where many corporate officers receive stock options, is not unusual. And with shares trading at just 9 times forward earnings, and down 17 percent in the past year, the health care plan giant isn't expensive.

However, the uncertainty in the healthcare space going into the 2020 election will only widen in the coming months, not narrow. For the time being, we think staying on the sidelines is the best approach. Investors may want to consider shares around $140, below the recent 52-week low.

Speculators should consider buying a put option with a $150 strike price to bet on a further downside in the coming months, looking for a mid-double-digit return to take profits given the limited downside as well.

Apple Launches iPhone 11, Prices Apple TV Plus

Posted: 11 Sep 2019 03:00 AM PDT

Company also drops details on Apple TV Plus, trade-in program.

In their fall event, Apple (AAPL) outlined their latest products and services. The headline announcement came from the iPhone 11, a $699 iPhone XR successor, which has a 6.1 inch display, dual rear cameras, and improved TrueDepth camera.

The company also updated on other services, such as Apple TV Plus, which will launch its first shows on November First. The company priced the monthly service at $4.99 per month, below expectations of $9.99 per month.

The company also launched a trade-in program in many countries that offer monthly payments, a service likely to allow it to retain customers. This development was on top of the iPhone 11 pro, the latest Apple Watch, and numerous other products.

Action to take: While Apple certainly isn't looking as innovative as it has in the past, the company's focus on services and increased profit margins and other metrics still looks intact following this latest conference.

Shares are a little high on an earnings basis compared to the company's average right now, but improved profitability down the line will likely drive shares even higher. Those betting on the company to fail will likely be disappointed.

Investors can buy shares up to $220.00. Speculators may want to look at January 2020 $225 calls to play off of a bounce from the Apple TV Plus launch before the end of the year.
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