Red Tidal Wave Coming…
Futures are solidly lower this morning as a wave
of selling circled the globe last night in response to Friday’s pathetic
performance. This wave will hit our shores shortly, and the summer lows
look to be in jeopardy. Currently, DJI futures are 93.0 lower, S&P futures
are 9.50 lower, Nasdaq 100 futures are 10.00 lower. In Europe, the FTSE 100 is
145.20 points, or 3.72% lower, the DAX is 133.36 points, or 4.57% lower, and the
CAC 40 is 163.93 points, or 5.56% lower (phew!). In Asia, the Nikkei closed
147.15 points, or 1.54%, lower, and the Hang Seng closed 222.25 points, or 2.39%,
lower. Interest rate futures are sharply higher, the dollar is sharply lower,
gold futures (December) are up $3.60, and crude oil futures are close to
unchanged.
In economic news, personal income and personal spending both came in below
expectations with personal income rising 0.4% vs. an expected 0.5%, and personal
spending rising 0.3% vs. an expected 0.5%. These reports had little effect on
the markets. The next guessing game is to try and figure out when the Fed steps
in with a) a rate cut; or b) a futures buy program. Keep the profit-taking
orders working in the market (see below), because this is the type of
downdraft that can be difficult to react to.
Volatility
Friday the VIX rose 3.03 to 43.14, the VXN actually dropped 1.23
to 57.86, while the QQV rose .71 to 49.18. Although base volatilities are not at
the highest levels of the year, implied volatility skews (the difference in
volatility between 25 delta calls and 25 delta puts) are extremely steep.
Update:Â (09 /27/ 02)
(
MMM |
Quote |
Chart |
News |
PowerRating) (1) — We sold out the remaining October 110/120 put spreads
at $4.80 (uggh!).
MMM (2) — We bought the October 90/100/110 put butterfly at $1.45 (25%).
New Recommendations
None.
Working Orders (Old Recommendations)
(
AMGN |
Quote |
Chart |
News |
PowerRating) — Sell the remainder of the January 30/40 put spread at
$5.00. (Far away).
(
BP |
Quote |
Chart |
News |
PowerRating) — Buy the October/January 40 put calendar spread (buy the January 40
puts, sell the October 40 puts) at $1.20 (25%).
(
CCU |
Quote |
Chart |
News |
PowerRating) — Bid $1.50 for another 25% of the January 40 calls.
(
IBM |
Quote |
Chart |
News |
PowerRating) — Sell half of the January 50/60 put spread at $4.00.
(
KSS |
Quote |
Chart |
News |
PowerRating) –Sell half of the January 60/70 put spread at $6.00.
(
S |
Quote |
Chart |
News |
PowerRating) — Sell half of the January 35/45 put spread at $6.00
Recap of open trades
Long-term
Reverse Collars
(
CIEN |
Quote |
Chart |
News |
PowerRating) — Long the January 2.5/5 reverse
collar at $.40 (25%).
Buy-writes
(
HAL |
Quote |
Chart |
News |
PowerRating) — Long the January 15 buy-write at $12.05 (100%).
Proxy buy-writes
(
DYN |
Quote |
Chart |
News |
PowerRating) — Long the January 15 calls at $3.20 — left over from proxy
buy-write (50%). Left for dead.
Complex Strategies
None.
Directional Positions
(
AMGN |
Quote |
Chart |
News |
PowerRating) — Long the January 30/40 put spread at $2.50 (25%).
(
BAC |
Quote |
Chart |
News |
PowerRating) — Long the January 50/60 put spread at
an average price of $2.50 (75%).
(
IBM |
Quote |
Chart |
News |
PowerRating) — Long the January 50/60 put spread at $2.00 (50%).
(
KSS |
Quote |
Chart |
News |
PowerRating) — Long the January 60/70 put spread at $3.00 (25%).
(
S |
Quote |
Chart |
News |
PowerRating) — Long the January 35/45 put spread at $3.00 (25%).
Short-term
Call Positions
(
CCU |
Quote |
Chart |
News |
PowerRating) — Long the January 40 calls at $2.50 (25%).
Call Spread Positions
None.
Put Positions
None.
Spread Positions
(
MMM |
Quote |
Chart |
News |
PowerRating) — Long the October 90/100/110 put butterfly at $1.45 (25%).
Stops
None.
|
|
- 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: https://www.theocc.com/publications/risks/riskchap1.jsp