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The Early Edge: Fannie Mae, Global Payments, Six Flags, and Sprint Nextel

A rundown of the morning's major news

by Mark Fightmaster (mfightmaster@sir-inc.com) 10/3/2008 9:08 AM

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Today's headlines include Fannie Mae (FNM) canceling a planned charge, Global Payments (GPN) reporting first-quarter earnings, Six Flags (SIX) considering steps should its price not rebound, and Sprint Nextel (S) receives interest in its Nextel business. Here is what you need to know about this morning's news.

Fannie Mae

After the closing bell rang yesterday, Fannie Mae (FNM: sentiment, chart, options) announced that it will cancel the planned increase in its delivery charge thanks to adverse market conditions. FNM was set to enact a 25-basis-point increase on November 1. Herb Allison, FNM President and CEO, noted the company's expectation that "this decision to forgo the across-the-board increase in our delivery charges will be passed on to borrowers in the form of lower mortgage costs." FNM added that, in light of these changes, it is evaluating its risk-management, underwriting guidelines, pricing and costs.

FNM is still poised to start the morning below the 2 level, which has acted as resistance since early September. If there is good news for the financial firm, it is that the stock is resting on its 10-day moving average. Despite the equity's rather sizeable plunge, option players are extremely bullish about FNM's prospects. The firm's Schaeffer's put/call open interest ratio (SOIR) of 0.30 is at a 52-week low. The problem with this sentiment is that it could unwind and serve to push the stock lower.

Global Payments

Electronic payment processor Global Payments (GPN: sentiment, chart, options) announced that its first-quarter net income increased to 71 cents per share. These results topped those of a year ago by 18 cents, and trumped the consensus estimate by 11 cents per share. The company also reported quarterly revenue of $405.8 million, topping the consensus estimate as well. The company also upped its 2009 earnings outlook to a range of $2.37 to $2.45 per share and its revenue forecast to a range of $1.64 billion to $1.68 billion.

GPN is poised to start the morning more than $3 higher thanks to its earnings report, but it appears that the 45 level may remain in a position of resistance. The good news is that the stock should take out resistance from its 10- and 20-month moving averages. Optimism already runs high on the Street toward GPN, as the firm's SOIR ranks in the seventh percentile and 12 of the 18 analysts following the firm rate it a "buy" or better.

Six Flags

Late yesterday, Six Flags (SIX: sentiment, chart, options) announced that it is considering a number of alternatives (including a reverse-stock split) in order to boost its share price to meet the NYSE's listing standards. SIX's 30-day average closing price is under $1, and the amusement-park operator stated that the NYSE generally gives companies 6 months to boost their share price. SIX stated that a reverse-stock split must be done no later than its annual meeting in May 2009 if it decides to make such a move. SIX has had to sell 7 parks identified as noncore assets and has lowered prices at several of its parks in hopes of keeping its businesses running.

To say that SIX is a poor performer is a bit of an understatement, as the stock is wallowing below $1. During the past 52 weeks, SIX has lost 81%, and it faces overhead resistance from all of its major trendlines. With the stock trading below $1, there is no SOIR reading available, but analysts are understandably bearish. According to Zacks, SIX receives 1 "strong buy," 1 "hold," and 2 "strong buys." Upgrades are possible for SIX, but the stock needs to turn its performance around quickly to spark such moves.

Sprint Nextel

According to an article in The Wall Street Journal, Sprint Nextel (S: sentiment, chart, options) has received interest from various potential buyers for its Nextel operations. S has been exploring a sale of this business, which has struggled to keep subscribers in the wireless market. Reportedly, the interest comes from NII Holdings (a Latin American firm) and several private-equity firms. However, the article adds that there are a variety of factors that are complicating any deal - including the cost of separating the Nextel unit to the large amount of debt S wants the buyer to take on.

S is set to start the morning slightly higher, but the stock still faces overhead resistance from its 10-month moving average. On a year-to-date basis, S has lost 54%, and sentiment from option players and analysts alike is pessimistic. S's SOIR of 0.79 is higher than 87% of those taken during the past 52 weeks and 13 of the 16 analysts tracking the firm rate it a "hold." Upgrades and/or a shift in sentiment from option players could help push S higher, but the firm's performance doesn't leave much hope for such moves.

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Options Stew: A Taste of the Week's Spiciest Plays

(11/20/2009 10:45:27 AM)

Welcome to our new video series, Options Stew, where we take a look back at what's been cookin' in the option pits this week. Join us as we sample just a few of the unusual option plays from the past week, with our "recipe" broken down into three unique segments:

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Schaeffer's Media Outtake: Thoughts on Hedging, Volatility

(11/19/2009 4:15:00 PM)

"Standard & Poor's, the world's leading index provider, announced today the launch of the S&P 500 Dynamic VEQTOR Index which dynamically allocates between equity, volatility and cash to provide broad equity market exposure with an implied volatility hedge. 'Implied equity volatility typically has a strong negative correlation to equity market returns, and is considered a useful tool to hedge against the potential downside risk of the broad equity market,' says Liz Taxin, Director of Strategy Indices for S&P Indices. The S&P 500 Dynamic VEQTOR Index is comprised of three components: Equity, as represented by the S&P 500; Volatility, as represented by the S&P 500 Short-Term VIX Futures Index; and Cash, as represented by the Overnight LIBOR rate. The Index allocates between equity and volatility based on the combination of realized and implied volatility trend decision variables, and these allocations are evaluated on a daily basis."
(PR newswire � 11/18/09)

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Put Trading Swells on J. Crew Group Ahead of Earnings

(11/18/2009 11:05:48 AM)

Retailers continue to line up for the earnings confessional, and one particular high-flyer is slated to release its quarterly report next week. J. Crew Group Inc. (JCG: sentiment, chart, options) is known for its preppy fashions, including jeans, khakis, and other basic (but often pricey) items sold to young professionals. J. Crew sells through its catalogs, Web sites, and some 300 retail and outlet stores in the U.S. under the J. Crew, crewcuts (for kids), and Madewell banners. Madewell, launched in 2006, is a women's-only collection of hip, casual clothes.

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Drilling Down on Rowan Companies' Rally Prospects

(11/18/2009 10:00:00 AM)

Rowan Companies Inc. (RDC: sentiment, chart, options) performs contract drilling of oil and gas wells. Its fleet consists of 22 jack-up rigs and 32 land-drilling rigs. The company operates primarily in the Middle East, Texas, the Gulf of Mexico, and the North Sea.

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Drug Delay Prompts Put Trading on ISIS Pharmaceuticals, Inc. (ISIS)

(11/17/2009 1:50:13 PM)

Bearish option bettors have virtually blitzed ISIS Pharmaceuticals, Inc. (ISIS: sentiment, chart, options) today, with intraday put volume skyrocketing to nearly 38 times the norm. The pharmaceutical firm this morning confessed that it's delaying plans to seek approval for experimental drug mipomersen by nearly a year, from mid-2010 to mid-2011.

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Pre-Earnings Option Activity Accelerates on Sears Holdings Corporation

(11/16/2009 1:55:56 PM)

Sears Holdings Corporation (SHLD: sentiment, chart, options) has been a hot topic on both sides of the options aisle today, as investors race to place their bets ahead of the retailer's looming turn on the earnings stage. According to Thomson Reuters, the firm is expected to report its third-quarter figures before the opening bell on Thursday, Nov. 19.

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Options Traders Bulk Up on Puts on Software Vendor

(11/13/2009 12:34:23 PM)

Options players are placing some heavy bets that salesforce.com inc. (CRM: sentiment, chart, options) is going to suffer a disappointing earnings report next week, as traders load up on puts. The International Securities Exchange (ISE) has reported 2.7 puts purchased to open for every one call purchased to open during the past 10 trading sessions. This ratio of puts to calls is higher than 93.8% of all those taken during the past year. In other words, puts are significantly more popular than calls among traders.

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Hopes Are Riding High for GameStop's Earnings

(11/13/2009 11:35:33 AM)

The video game sector is struggling. U.S. video game sales dropped by 18% in October compared to the same period last year, according to the latest data from NPD Group. Meanwhile, analysts had forecast a more modest decline of 11%.

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Options Stew: A Taste of the Week's Spiciest Plays

(11/13/2009 10:55:42 AM)

Betting on a Short-Term Bounce for First Solar, Inc. (FSLR)

(11/12/2009 3:15:41 PM)

Call traders have been fond of First Solar, Inc. (FSLR: sentiment, chart, options) today, despite the solar concern's retreat into the red. In afternoon trading, the security has already seen roughly 18,000 calls cross the tape � nearly tripling its average intraday volume of fewer than 6,250 contracts.

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The Early Edge: Fannie Mae, Global Payments, Six Flags, and Sprint Nextel

A rundown of the morning's major news

by Mark Fightmaster (mfightmaster@sir-inc.com) 10/3/2008 9:08 AM

FNM

GPN

SIX

S

stocks

options