>>> US Gapping Up

Gapping up
In reaction to strong earnings/guidance: NADL +11.7%, EDAP +11.6%, BURL +8.8%, SIG +5.7%, PVH +5.2%, PRCP +3.9%, GOGL +3.5%, AVGO +3.4%, SJM +3.3%, PSEC +3%

M&A news: STJ +4.2% (FT report that Abbot (ABT) is considering a $25 bln bid; Bloomberg TV reports that Abbot (ABT) denied the report that it was preparing a bid for STJ), TOT +3.3% (divests its North Sea Midstream assets for GBP585 mln), NGD +2.6% (to sell its 30% interest in the El Morro project to Goldcorp)

Select China related names showing strength: YGE +15.6%, SHI +8%, WB +7.3%, JKS +6.1%, JMEI +5.6%, LEJU +5.5%, BTU +5.2%, KNDI +5.1%, ACH +4.8%, SUNE +4.6%, CSIQ +4.4%, QIHU +4.3%, TSL +4%, YNDX +3.8%, JD +3.6%, CMCM +3.4%, BIDU +3.2%, SFUN +2.8%

Select metals/mining stocks trading higher: AKS +7%, GFI +3.3%, X +1.7%, GG +1.0%


Other news: NQ +57.8% (entered into agreement to sell Nation Sky for $80 mln and FL Mobile for no less than ~$626 mln; co also reported earnings), GBSN +34.3% (announces intent to settle certain warrant exercises with cash), FORD +9.9% (cont strength), EXEL +8.5% (announces Swissmedic, the supervisory authority of Switzerland, has approved cobimetinib for use in combination with vemurafenib to treat patients with advanced melanoma), FCX +4.3% (announces further spending cuts in response to market conditions), RAX +2.4% (still checking), ACAS +1.6% (closed on the sale of $510 mln of collateralized loan obligation bonds), SIRI +1.3% (announced Board authorization for the addition of a further $2 billion to its stock repurchase program)

Analyst comments: CEO +11.7% (upgraded to Outperform at Credit Suisse), PBYI +6.3% (initiated with a Overweight at JP Morgan), TDOC +5.2% (initiated with a Outperform at Leerink Partners), SCTY +4.7% (upgraded to Overweight from Equal-Weight at Morgan Stanley), BSX +3.5% (upgraded to Buy from Neutral at Goldman), YELP +2.9% (upgraded to Neutral from Sell at B. Riley & Co), ACAD +2.9% (upgraded to Overweight from Neutral at Piper Jaffray;), ANF +2.5% (upgraded to Buy from Hold at Stifel), AMZN +2% (upgraded to Strong Buy from Outperform at Raymond James), PHG +1.8% (upgraded to Buy at Nomura ), AFL +1.5% (upgraded to Outperform from Mkt Perform at Keefe Bruyette), QLIK +1% (initiated with a Buy at Nomura
)

>>> US Gapping down

Gapping down
In reaction to disappointing earnings/guidance: WSM -6.2%, GES -6.1%, TIF -5.4%, WDAY -4.7%, TLYS -4.1%, DG -3.5%, QURE -3%, MIK -2.2%, VNET -1.5%, PSG -0.7%


Other news: ANAD -5.8% (filed registration statement for up to $50 mln offering of a combination of debt and equity securities; disclosed entry into an At-The-Market Issuance Sales Agreement with MLV & Co to sell common stock), RUN -4% (to issue Q2 earnings report after the market closes on Thursday, September 10, 2015), VNET -1.5% (announced management changes: CFO Terry Wang has resigned as a director of the Board, Sean Shao appointed as an independent director, effective on August 24; co also reported earnings), RJET -1.4% (cont weakness), IMNP -1.0% (filed for 14 mln share common stock offering by selling shareholders), DEO -1.0% (EU peer Pernod Ricard (PDRDF) trading lower after earnings)

Analyst comments: N/A.

(BArron's) Profit From a Surging VIX

Profit From a Surging VIX

If you think the CBOE Volatility Index reflects too much pessimism about China, then the options market looks like paradise for put sellers.

If you liked the VIX at 12, you should love it at these elevated levels.

A high VIX today suggests your fellow investors are scared out of their minds that China’s economic and financial difficulties will send the world spinning into a very dark place.

However, if you think that the CBOE Volatility Index view of what may happen in the next 30 days is extremely pessimistic, the options market is a paradise for put sellers.

In recent trading, the VIX was around 32.60. When the VIX is above 30, it is interpreted as pricing an economic depression. That rationale was minted during the credit crisis of 2007 and 2008 that turned the VIX into one of the world’s most watched market indicators.

At its current level, the VIX is far above its long-term average of 19. On Aug. 14, the VIX was at 12.80. The VIX is a proxy for the Standard & Poor’s 500 index. When the VIX is high, puts on the largest stocks tend to be expensive. This is because investors are buying puts to hedge their portfolios or single-stock positions.

Investors can take advantage of the fear premium by selling puts. The trade expresses a view that the associated stock will rise. If the stock declines, investors are obligated to buy the stock.

At this moment, selling puts is like selling insurance during hurricane season. You are going to get paid a lot, but the risks are high. You can mitigate the risk by selling puts only on stocks you want to own. Do not sell puts on any stock you are not prepared to buy.

The strategy can be used to position to buy market darlings like Amazon.com (ticker: AMZN ) and Facebook ( FB ), and any stock that pays reliable, hefty dividends.

Consider Facebook, a play on mobile advertising that some Wall Street investors are starting to discuss as potentially another game changer like Apple.

With the stock at $85, you can sell Facebook’s September $82.50 put for $3.25.

Facebook’s stock has traded in the $90s since July, reflecting a steady advance that began in March. But China’s stock market crash, which crashed into the U.S. market on Monday, pushed Facebook as low as $72 in intraday trading.

If Facebook retraces its losses, and the stock stays above the put strike prices, investors can pocket the premium.

Should the stock decline below the $82.50 or $83 strike prices, investors are obligated to buy the stock. The risk is that the stock falls far below the strike prices. If that happens, investors would be obligated to buy the stock at the strike price, or cover the put at a sharply higher price.

Stocks that pay reliable dividends are also good put-sale candidates in the current environment. The stock market’s gyrations tend to drive investors to stocks like AT&T ( T) and Southern Co. ( SO ) that pay hefty, reliable dividends that are greater than the 2% yield of 10-year U.S. Treasury bonds.

At about $32, AT&T’s dividend yield is 5.6%. Investors can sell the October $32.50 put recently bid around $1.02. If you want to take in more money, sell the January $31 put that was recently bid at $1.36.

Investors will be tempted to bottom-fish in the oil sector, especially with a focus on leviathans like ExxonMobil ( XOM ) and Chevron ( CVX ) that pay good dividends.

Those are extra risky trades. The stocks will be pushed around by the market, and oil. Anyone who sells puts on Exxon and Chevron should probably stick to options that expire in a month or less. The premiums will not be as large as say three-month expirations, but too much can happen between now and the end of the year.

Investors who want to mitigate single-stock risk in the oil patch can sell puts on the Energy Select Sector SPDR exchange-traded fund ( XLE ). The ETF is a basket of energy stocks, which diversifies the risk. If this appeals, focus on puts that are 5% to 10% below XLE’s price and that expire in less than three months.

To be sure, selling puts during extreme stock market volatility will strike some investors as financial insanity, but it expresses an approach to options trading that has been tempered by time.

When volatility is low, options tend to be better buys than sales. That animated our thinking when we recommended buying SPDR S&P 500 ETF ( SPY ) puts to hedge against a China-induced decline.

Think of volatility as a rubber band. When volatility is stretched, it tends to revert to the mean.

Now, with VIX roughly triple its Aug. 14 level, selectively selling options on quality stocks makes sense.

>>> Early premarket gappers

Early premarket gappers
Gapping up: NQ +58.4%, STJ +14.7%, EDAP +11.6%, FORD +10.5%, EXEL +9.9%, RAX +9.5%, WB +9.1%, NADL +8.3%, CSIQ +7.7%, JKS +7.4%, BURL +6.6%, TSL +5.6%, JMEI +5.6%, YNDX +5.3%, PVH +5.2%, CMCM +5.1%, KNDI +5.1%, QIHU +5%, SFUN +5%, GFI +4.8%, SIG +4.7%, JD +4.6%, BSX +4.5%, BIDU +4.1%, SDRL +4%, PRCP +3.9%, TOT+3.8%, FIT +3.6%, SUNE +3.5%, PSEC +3%, ACAS +1.6%, AVGO +1.6%, SIRI +0.5%

Gapping down: GES -8.4%, TIF -6.9%, WDAY -6.8%, WSM -6.8%, ANAD -5.8%, TLYS -4.1%, RUN -4%, DG -3.5%, QURE -3%, MIK -2.2%, DEO -1.1%, IMNP -0.8%, THOR -0.8%, PSG -0.7%

>>> Fred's reports Q2 in-line with lowered guidance; guides Q3 EPS below consens

Fred's reports Q2 in-line with lowered guidance; guides Q3 EPS below consensus, revs in-line; guides FY16 EPS below consensus

  • Reports Q2 (Jul) loss of $0.13 per share, in-line with the Capital IQ Consensus of ($0.13); revenues rose 11.2% year/year to $546.1 mln vs the $563.63 mln consensus.
  • Warned on Aug 6: Lowered EPS to ($0.15-0.10) from $0.02-0.07 vs. $0.03 consensus; preannounced rev $545 mln vs. $564 mln consensus.
  • Co issues guidance for Q3, sees EPS of $0.08-0.12 vs. $0.15 Capital IQ Consensus Estimate; sees Q3 revs of +12-14% to ~$533-542.8 mln vs. $540.83 mln Capital IQ Consensus; comps +0-2%.
  • Co issues downside guidance for FY16, sees EPS of $0.10-0.18 vs. $0.26 Capital IQ Consensus Estimate.

>>> Tiffany & Co misses by $0.05, misses on revs; lowers guidance

--> TIF -7.15% Pre open 8k shares traded for nomw

Tiffany & Co misses by $0.05, misses on revs; lowers guidance

Reports Q2 (Jul) earnings of $0.86 per share, excluding non-recurring items, $0.05 worse than the Capital IQ Consensus Estimate of $0.91; revenues fell 0.2% year/year to $991 mln vs the $1 bln consensus; comparable store sales increased 7%.
  • Gross margin (gross profit as a percentage of net sales) of 59.9% in the second quarter was equal to the prior year, while gross margin of 59.5% in the first half was modestly above 59.1% a year ago.
  • Co sees no earnings growth in Q3 (~$0.73) vs. $0.84 Capital IQ Consensus Estimate.
  • Co lowers guidance for FY16, to EPS of 2-5% below last years's $4.20 ($3.99-4.12), vs minimal growth prior guidance and $4.23 Capital IQ Consensus Estimate. Also for the full year, this forecast does not assume recording any further similar loan impairment charges; this forecast does continue to assume inventories increasing at a rate below sales growth; capital expenditures of $260 million; and free cash flow in excess of $400 mln. All assumptions are approximate and may or may not prove valid.
  • "In light of the difficult environment exacerbated by the strong dollar and ongoing external uncertainties, we are tempering our full year earnings forecast. However, we remain focused on pursuing longer-term growth opportunities that strengthen Tiffany's position among the world's important luxury brands."

>>> Signet Jewelers beats by $0.13, beats on revs; guides Q3 EPS in-line

--> SIG +0.67% pre open - only 2k traded

Signet Jewelers beats by $0.13, beats on revs; guides Q3 EPS in-line

Reports Q2 (Jul) earnings of $1.28 per share, $0.13 better than the Capital IQ Consensus Estimate of $1.15; revenues rose 15.1% year/year to $1.41 bln vs the $1.39 bln consensus.
  • Same store sales increased 4.2% compared to an increase of 4.8% in the 13 weeks ended August 2, 2014 driven by positive sales performance across all national store brands.
Guidance
Co issues in-line guidance for Q3, sees EPS of $0.36-0.40 vs. $0.37 Capital IQ Consensus Estimate.
  • Co sees Q3 Same store sales +3-4%

>>> Movado Group follow-up: MOV beats by $0.08, beats on revs; reaffirms FY16 EP

--> No Pre-market for now

Movado Group follow-up: MOV beats by $0.08, beats on revs; reaffirms FY16 EPS guidance, revs guidance

Reports Q2 (Jul) earnings of $0.50 per share, $0.08 better than the Capital IQ Consensus Estimate of $0.42; revenues rose 1.4% year/year to $145.6 mln vs the $142.1 mln consensus. Gross profit was $141.5 million, or 53.2% of sales, compared to $142.8 million, or 54.0% of sales in the same period last year.
  • Co reaffirms guidance for FY16, sees EPS of $2.00-2.10 vs. $2.05 Capital IQ Consensus Estimate; sees FY16 revs of $590-600 mln vs. $593.13 mln Capital IQ Consensus Estimate.
  • Co is expecting to deliver its first connected Movado timepiece during the fourth quarter and believes wearable technology represents a great opportunity for Movado Group.