Volume Spike Investor

There were two hot Chinese IPOs that debuted today and to call them ‘hot’ may be an understatement.  Seeing two near-doubles in a single day is not the norm even for a bull market.  These two are in Youku.com Inc. (NYSE: YOKU) and E-commerce China Dangdang Inc. (NYSE: DANG).

Youku.com Inc. (NYSE: YOKU) priced 15,847,700 American Depositary Shares at $12.80 per share.  E-commerce China Dangdang Inc. (NYSE: DANG) priced 17,000,000 American Depositary Shares at premium of $16.00 per ADS.

UPDATED PRICES FOR 4:00 CLOSE: Dangdang closed at $29.91 versus a $16.00 pricing and a low of $23.80 on almost 29.5 million shares.   Youku.com closed at $33.44 versus a $12.80 price and versus a low of $25.57 on over 16.8 million shares.

Chinese IPOs have been extremely hot in 2010.  If you want to know why these are so hot that is a simple reasoning.  For DANG, think of it as the emerging version of Amazon.com Inc. (NASDAQ: AMZN) in China.  For YOKU, think of it as the emerging version of YouTube that is owned by Google Inc. (NASDAQ: GOOG).

At 10:27 AM EST we have seen YOKU trade at $27.14 on more than 6.1 million shares already and the post-IPO range is $25.57 to $30.00.  At 10:27 AM EST we have seen DANG trade at $27.25 on more than 13.3 million shares already and the post-IPO range is $23.80 to $30.00.

JON C. OGG

Netflix Inc. (NASDAQ: NFLX) is rapidly losing its greatness when it comes to momentum and growth investors.  On top of a well known short seller highlighting its flaws last week, the company is rather active in the after-hours session on news that its CFO is leaving.

The NASDAQ after-hours session shows that as of 6:00 PM EST the shares are trading down 3.6% at $183.00 after a close of $189.81.  After-hours volume is also very high considering close to a $200 share price.

Chief Financial Officer Barry McCarthy is leaving the company.  The listed reason is that he “has expressed a desire to pursue broader executive opportunities outside the company.”

The change is effective December 10.  Netflix shares are up close to 300% from the 52-week lows and he holds roughly 51,563 shares as of the November 10 date.

JON C. OGG

The Talbots Inc. (NYSE: TLB) is having an awful day in the markets and on very strong volume.  The earnings report and the guidance are to blame.  While profits rose 17%, lower revenue and lower guidance is a drag and then some.

Earnings were $0.27 EPS and revenue was $299.1 million, while Thomson Reuters was calling for $0.25 EPS and $303.1 million in revenues.  Guidance was put at a loss for the coming quarter and that translates to an annual guidance of $0.70 to $0.78 EPS against a Thomson Reuters estimate of $0.87 and a prior forecast of $0.84 to $0.92.

At 11:40 AM EST we have shares down over 19% at $9.21 against a 52-week trading range of $6.81 to $17.79.  More importantly, the volume is already over 18.5 million, more than six-times than the 3.05 million shares on an average trading day.

We are seeing a move in options trading as well, although many trades are mixed.  The DEC-2010 CALLS showed the following:
CALL$    Volume    OpInt
9.00    1,183    653
10.00    1,227    3,377
11.00    1,469    5,652

Elsewhere, the JAN-2011 CALLS:
CALL$    Volume    OpInt
10.00    1,389    2,344
11.00    1,122    2,321

Even the JAN-2012 CALLS are active:
CALL$    Volume    OpInt
15.00    2,055    3,721

JON C. OGG

Columbia Laboratories, Inc. (NASDAQ: CBRX) is seeing a massive volume explosion this morning.  The company reported an update on its Phase III trial of Prochieve, a gel which aims to help preterm birth rate declines.  In short, it is designed to lower premature birth.  It and and Watson Pharmaceuticals, Inc. (NYSE: WPI) said that PROCHIEVE 8% significantly reduced incidence of preterm birth at less than or equal to 32 6/7 weeks gestation versus placebo.

The primary result showed that vaginal progesterone cuts the rate of preterm birth, which is said to affect 10 to 12% of all pregnancies in the United States with a cost of some $26 billion per year.

In just the first 9 minutes of trading and after the pre-market trading, Columbia Labs is seeing a 31% gain to $1.98 and it hit a new 52-week high of $2.00 per share with a new 52-week range of $0.80 to $2.00.  More importantly, there have been a whop[ping 4.5 million shares traded against an average volume of only about 200,000 shares per day.

UPDATE AT 3:15 PM EST: Shares are up 15.2% at $1.74 and the trading volume is now 11.44 million shares.

The market cap after the pop is some $160 million, making many hope that more gains are possible simply due to a small market cap.

Watson shares are also higher with a 2.6% gain to $50.86 versus a 52-week trading range of $37.26 to $52.20.  Volume in Watson is much more normal at 325,000 shares against normal volume of 1.54 million shares per day.

JON C. OGG

Tiffany & Co. (NYSE: TIF) may have only closed up $0.10 at $63.30 on a normal day with 2.52 million shares on Friday.  The issue is that the 52-week range is $35.81 to $63.65 and average volume is 2.1 million shares.

The real activity was seen in the call option buying with a standout trading pattern.

We saw in the FEB-2011 $70.00 CALLS that the contracts traded were 8,834 contracts versus an open interest of 17,641 contracts.

Despite a monster run and despite high valuations, someone is betting on some added upside.  If not, they are hedging some short-bets.

JON C. OGG

Secondary offerings often create volume spikes in the shares, but we are seeing moves in several key stocks with secondary offerings.  The moves are in Sequenom, Inc. (NASDAQ: SQNM), DryShips Inc. (NASDAQ: DRYS), Teekay Offshore Partners LP (NYSE: TOO), and Qlik Technologies Inc. (NASDAQ: QLIK).

Sequenom, Inc. (NASDAQ: SQNM) said the underwriters of its offering that priced on December 2, 2010 have exercised in full their overallotment option to purchase an additional 2,100,000 shares; so the offering will total 16,100,000 shares at $6.00 per share for total gross proceeds of $96.6 million to Sequenom.  Shares are down 1.8% at $6.63 on almost 300,000 shares as of 9:50 AM EST; yesterday shares closed down only $0.06 at $6.75 but that was on more than 9.7 million shares.

DryShips Inc. (NASDAQ: DRYS) is soaring on word that its Ocean Rig UDW Inc. subsidiary plans to offer roughly $500 million of stock via a private placement to raise funds for the construction of its deepwater drillships.  DryShips at 9:50 AM EST is trading up almost 9% at $5.70 on 11.7 million shares versus an average volume of 14.9 million shares and versus a 52-week range of $3.28 to $6.95.

Teekay Offshore Partners LP (NYSE: TOO) is down 5.7% at $27.43 on more than 1.1 million units after it priced 5.6 million units at $27.84 to buy more ships.  Average volume is only 222,000 units a day and the 52-week range is $16.89 to $29.94.

Qlik Technologies Inc. (NASDAQ: QLIK) sold 11.5 million shares in a public secondary offering at $23.00 per share.  Shares have recovered and are down now ‘only’ by 1.1% at $23.09 versus a post-IPO trading range this year of $14.00 to $27.70.  Volume is through the roof at 2.2 million shares versus only about 350,000 on an average day.

These are not even all of the secondary offerings today.

JON C. OGG

Gold is at a crossroads and the options trading is showing some unusual activity out in the long-dated LEAPS for the SPDR Gold Shares. The JAN-2012 $150.00 GLD CALLS have traded 7,479 contracts today versus an open interest of 27,030 contracts.  Last trade was $9.55.  If you go out farther in the LEAPS, the JAN-2013 trades are as follows:

• $150.00 CALL 3,056 contracts traded versus an open interest of 4,325, last trade $17.55.
• $160.00 CALL 1,010 contracts traded versus an open interest of 4,220, last trade $15.05.

We gave a fundamental and technical review at 247wallst.com and our affiliate at INO has a technical analysis showing that some key levels may have been reached.

JON C. OGG
1:20 PM EST

Palm Harbor Homes Inc. (NASDAQ: PHHM) is one of the rare exceptions of what happens when companies file for bankruptcy protection under Chapter 11.  The company announced by press release that it and 5 subsidiaries have filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code.

The company has partnered with Fleetwood Homes, Inc., a subsidiary of Cavco Industries, Inc. (NASDAQ: CVCO) through a sale process.

In conjunction with the filing, Palm Harbor has received a commitment of $50 million.  The $50 million may increase to $55 million if certain conditions are met, for a debtor-in-possession credit facility from Fleetwood Homes that will be used to extinguish all obligations due on the existing Textron Financial Corporation facility and fund post-petition operations, commitments to customers, and employee obligations.

Palm Harbor Homes is seeing shares up 79% at $0.26 on more than 7.1 million shares.  With an average of just under 200,000 shares per day, this is about 35-times normal volume.

More details of this are available at its press release.

JON C. OGG

It looks as though equity traders in high-priced shares are becoming speculative options traders.  Look no further than Amazon.com Inc. (NASDAQ: AMZN) today.  At Noon EST the stock itself is up almost 0.6% at $178.23 and we have already hit 5.7 million shares.

Here is the volume in DEC-2010 CALLS as of NOON EST, with the first of each of the same strike price being the weekly expiration contracts:
CALL$    Volume    OpInt
170.00    1,782    7,228
175.00    949    2,054
175.00    2,323    6,376
180.00    4,294    2,458
180.00    5,111    5,919
185.00    2,770    1,447
185.00    3,686    3,485
190.00    1,511    1,411
190.00    1,512    2,395
195.00    582    601
195.00    999    1,899
200.00    505    106
200.00    2,182    5,320

Shares hit a new high of $181.84 this morning.  The 52-week trading range is now $105.80 to $181.84 and the average daily volume is 6.32 million shares.

JON C. OGG

McDonald’s Corporation (NYSE: MCD) and The Coca-Cola Company (NYSE: KO) are not stocks we generally associate with dividend capture trades, or dividend stripping trades.  On Friday, there were two major groupings of large call options trades out in January 2011 expiration.

We confirmed with Joe Kunkle of OptionsHawk.com that these were dividend stripping trades.  It was obvious that was the trade, but it is often better to hear from options industry insiders.  Kunkle noted, “The heavy options trading in Coca Cola and McDonald’s on Friday were not directional bets, just an arbitrage strategy known as dividend stripping seen it most every stock ahead of it’s ex-dividend date.”

These dividend captures represent millions of shares on a fully leveraged basis.

McDonald’s Corp. (NYSE: MCD) JAN11 CALLS:
CALL$    Volume    OpInt
50.00    17,300    89
55.00    118,600    5,609
57.50    3,200    386
60.00    259,110    12,644
62.50    2,000    260
65.00    248,016    12,994
67.50    27,070    2,410
70.00    241,166    21,094

The Coca-Cola Company (NYSE: KO) JAN11 CALLS:
CALL$    Volume    OpInt
30.00    9,800    705
35.00    3    1
37.50    20    15
40.00    920    115
42.50    20    90
45.00    6,000    533
47.50    19,500    1,262
50.00    273,000    15,205
52.50    116,518    6,244
55.00    536,030    29,513
57.50    243,090    16,519

There is no such thing as free money, but sometimes there is the next closest thing.

JON C. OGG