Taking Evasive Action?
The market looks set to open
slightly better despite yesterday’s weak close.
P&G
(
PG |
Quote |
Chart |
News |
PowerRating) raised guidance and picked up an upgrade. This may be offset
by Merck downgrades and a warning from
American Express
(
AXP |
Quote |
Chart |
News |
PowerRating).
Tomorrow we have November PPI figures. Look for a choppy
to lower trade.
Updates:
Puts and put spreads in retail stocks.
* We were able to buy the
(
BBY |
Quote |
Chart |
News |
PowerRating) (Best Buy) Jan. 60/70
put spread for 3.20 and 3.40. This represents
a 25% position.
* We were able to purchase a small amount of the
(
TGT |
Quote |
Chart |
News |
PowerRating)
(Target) Jan. 35 puts @ 1.05.
* We were able to buy the
(
WMT |
Quote |
Chart |
News |
PowerRating) (Wal-Mart) Jan. 55
puts @ 2.35.
We now have a 25% position in BBY and WMT, and a small
position in TGT. We will be
looking to add over the next week. Our recommendation was for subscribers
to do ONE of these three trades, even though they all are attractive.
We have done all three, and will actively manage all three for
subscribers.
(
DYN |
Quote |
Chart |
News |
PowerRating) — Dynegy continues to slide along with Calpine
(
CPN |
Quote |
Chart |
News |
PowerRating) and other energy
producers being painted with the Enron
(
ENE |
Quote |
Chart |
News |
PowerRating) brush. We disagree with
this, but the market is what it is, and we are
below the breakeven point of our
buy-writes. Today we may be looking to take evasive action.
(
AZO |
Quote |
Chart |
News |
PowerRating) — It has been five days since we took pipe on
the Autozone earnings. At the time, we
had a 25% position in the March 55/65 put spread
(long at 3.50). It is currently trading around $2.00. We are continuing
to monitor AZO, and it is once again weakening. There is a possible
island top being formed. Therefore, we continue to hold the original
position and may add more in the coming days.
Current Recommendations:
We recommend scaling into ONE of the following
short positions in retail stocks:
WMT — Buy the Jan. 55 puts @ 2.35 (settled 2.50).
BBY — Buy the Jan. 60/70 put spread @ 3.50 or better
(settled ~3.40). This is
attractive because the implied volatility in the 70 puts is
around 53%, while the implied volatility in the 60 puts is around 63%.
TGT — Buy the Jan. 35 puts @ 1.05 (settled 1.25).
Buy-writers in general — scale purchase protective puts.
Complete by Christmas.
Rolls / Adjustments:
(
AMR |
Quote |
Chart |
News |
PowerRating) — Those of you with Jan. ’02 25 calls from the
calendars you may:
A) Put a $1.50 offer in for the Jan. 25 calls to
liquidate.
B) Put a. $.50 offer in for the Dec. 25 calls to roll
into the Jan./Dec. 25 call calendar at a net
cost of .25.
(
JDSU |
Quote |
Chart |
News |
PowerRating) — Put a $1.00 bid in for the JDSU Jan. 10
calls that we previously sold
for $3.00. These calls were a part of the original JDSU Jan.
7.5 put/Jan. 10 call reverse collar strategy.
Recap of open trades:
Long-term
Airline calendar spreads
(
AMR |
Quote |
Chart |
News |
PowerRating) Jan./Oct. 25 call calendar @ .75 — Oct.’s went
out worthless, holding Jan. See
rolls above.
(
UAL |
Quote |
Chart |
News |
PowerRating) Jan./Oct. 25 call calendar @ .70 — Oct.’s went
out worthless, holding Jan.
Butterflies
(
DELL |
Quote |
Chart |
News |
PowerRating) — Long the DELL Dec. 20/25/30 call butterfly
at 1.75.
Reverse Collars
(
AWE |
Quote |
Chart |
News |
PowerRating) Jan. 12/15 reverse collar (long the Jan. 15
calls, short the Jan. 12.5 puts)
@ .05 average. Stop below.
(
TLAB |
Quote |
Chart |
News |
PowerRating) March 17.5/15 reverse collar (long the March
17.5 calls, short the March 15
puts) @ .50 credit average. Took profits at a $1.05 average on
50%. We might be looking to re-enter this position on weakness. Stop
below.
Buy-writes
*
(
AMZN |
Quote |
Chart |
News |
PowerRating) Jan. ’03 10 buy-write @ 5.15 (2 units) —
hold.
*
(
DYN |
Quote |
Chart |
News |
PowerRating) Jan. 30 buy-write @ 25.75 — hold.
*
(
JDSU |
Quote |
Chart |
News |
PowerRating) Jan. 12.5 buy-write @ 9.60 — hold.
Proxy buy-writes
(
BA |
Quote |
Chart |
News |
PowerRating) Jan. ’03 35/Jan. ’02 40 call calendar @ 5.00 —
hold.
BA Jan. ’03 40/Nov. ‘ 01 40 call calendar @ 3.00 — hold.
Complex Strategies
JDSU — Long 1 unit of the Jan. 10 calls and short 2 units
of the Jan. 7.5 puts @ 0.00 —
sold 50% of the Jan.; 10 calls at 3.00.
We are currently bidding $1.00 for the Jan. 10 calls to
re-establish the original
position.
Short-term
Call Positions
(
WCOM |
Quote |
Chart |
News |
PowerRating) Jan. 12.5 calls @ 2.40 — hold. Stop below.
(
CIEN |
Quote |
Chart |
News |
PowerRating) — Long the Dec. 22.5 calls @ 1.05 — hold.
Put Positions
(
TGT |
Quote |
Chart |
News |
PowerRating) — Long the Jan. 35 puts @ 1.05 (10%) — hold.
(
WMT |
Quote |
Chart |
News |
PowerRating) — Long the Jan. 55 puts @ 2.55 (25%) — hold.
Put Spread Positions
(
BAC |
Quote |
Chart |
News |
PowerRating) — Long the Dec. 55/60 1:2 ratio put spread at
.30 — hold.
(
AZO |
Quote |
Chart |
News |
PowerRating) — Long the March 55/65 put spread @ 3.50 (25%)
— hold.
(
BBY |
Quote |
Chart |
News |
PowerRating) — Long the Jan. 60/70 put spread @ 3.30 (25%)
— hold.
STOPS
(
AWE |
Quote |
Chart |
News |
PowerRating): Stop @ 12.25 close only.
(
WCOM |
Quote |
Chart |
News |
PowerRating): Stop @ 13.95 close only.
(
TLAB |
Quote |
Chart |
News |
PowerRating): Stop @ 11.95 close only.
|
If you would like to receive Tony and his trading |
* Options trading involves substantial risk
and is not suitable for all investors.
Also note that spread strategies involve multiple commissions
and are not risk-free. Most spreads must be done in a margin account.
* Because of the importance of tax
considerations to all options transactions, the
investor considering options should consult with a tax advisor
as to how taxes may affect the outcome of contemplated options transactions.
* Supporting documentation for claims,
comparisons, recommendations, statistics or other
technical data will be furnished upon request. One or
more of the contributors to these commentaries may have
a position in one or more of the securities mentioned. It
is important to note that the options strategies discussed herein are not
suitable to all investors. Options are complex investment tools and involve
substantial risk. Moreover spreading strategies do not eliminate risk
and involve multiple commissions.
Note: All individuals must have read the
ODD carefully before trading options. To obtain the
document, click on the OCC link:
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