Big Slide Underway Overseas, Headed Our Way

On the economic front, retail sales came in at + 0.8% vs. expectations of 
+0.4%, but only +0.4% ex-auto, right in line with expectations. PPI came in
softer than expected with the headline number showing unchanged vs. expectations
of a gain of 0.2%, and the core number (ex food and energy) showing a drop of 0.1%
vs. expectations of a 0.1% gain. Deflation mongers take note. Probably the most
important number of the day will be released at 08:50 CDT: September preliminary
Michigan sentiment numbers, expected to show a reading of 88.

Volatility

Volatility had quite a jam session yesterday. The VIX gained 3.50 to 40.72, the
VXN rose 2.44 to 56.44, and the QQV gained 2.13 to 48.03. Expect more of the
same today and probably in front of every weekend until this war on Iraq starts
(it will probably last about 15 minutes).

Strategy

If the above mentioned technical levels get taken out on a closing basis,
we should liquidate the ratio call spreads in both the September DJX and QQQ
options for whatever we can get. If at that point we can’t get anything for
them, then obviously we should just hold them for a “get lucky” trade
next week.

If retail stocks should pop on today’s numbers, we should add to our short
positions there. I’ll keep you posted. Also, the action in the oil stocks
yesterday should tell you that we want to be short these things going into this
war. Any pops on news out of either Iraq or Israel should be viewed as selling
opportunities there.

Update: (09/12/02)

(
CCU |
Quote |
Chart |
News |
PowerRating) — We bought a really small amount of the October 35 calls at
$2.50 (10%) while the stock was around $35.10 or so, watched the stock crater to
$33.00 on what appeared to be a large print, and then watched it rally back to
$35.00. I saw the October 35s get offered down to about $1.70, but try as I
might, I could not buy any more. Really puzzling action, and I never did see any
news. If anyone knows what went on in there, please let me know!

New Actions (New Recommendations)

None.

Working Orders (Old Recommendations)

(
BP |
Quote |
Chart |
News |
PowerRating) — Buy the October/January 40 put calendar spread (buy the January 40
put, sell the October 40 put) at $1.15 (25%).

(
QQQ |
Quote |
Chart |
News |
PowerRating) — Sell half of the September 23/26 1:2 ratio call spread at $1.50,
the remainder at $2.00.

(
MMM |
Quote |
Chart |
News |
PowerRating) — Sell 25% of the October 110/120 call spread at $4.00 and 25% at
$5.00 (away now).

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

(
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%).

None.

Call Spread Positions

DJX — Long the September 86 / 90 1:2 ratioed call spread at $.50 (50%).

(
QQQ |
Quote |
Chart |
News |
PowerRating) — Long the September 23 / 26 1:2 ratioed call spread at $.50 (50%).

Put Positions

None.

Spread Positions

(
AHC |
Quote |
Chart |
News |
PowerRating) — Long the October 65/70 put spread at $1.50 (25%).

(
C |
Quote |
Chart |
News |
PowerRating) — Long the December/September 30 put calendar spread at $.975 (50%).

C — Long the January/September 30 put calendar spread at $1.20 (50%).

(
CCU |
Quote |
Chart |
News |
PowerRating) — Long the October 35 calls at $2.50 (10%).