Just Say No!
It is the Friday before a three-day weekend. It is month-end markup
day. It is August. The futures exchanges close at noon (but the money-grubbing
stock exchanges wish to stay open for a full day). Knowing all of these things,
knowing it will be a choppy, contrived, manipulated and low-volume day, you need
to ask yourself a question: Do I need to trade today? If you do it for a living,
that’s one thing, but if you don’t, do yourself a favor and get to the beach,
play golf, play with your kids — anything else.
Stocks look set to open lower this morning on the back of last night’s warnings
and cautious commentary from the likes of Novellus
(
NVLS |
Quote |
Chart |
News |
PowerRating) ,Sun
(
SUNW |
Quote |
Chart |
News |
PowerRating),
and BellSouth
(
BLS |
Quote |
Chart |
News |
PowerRating). In addition, Merrill has downgraded several
semiconductor equipment stocks, including
(
KLAC |
Quote |
Chart |
News |
PowerRating),
(
AMAT |
Quote |
Chart |
News |
PowerRating) and
(
NVLS |
Quote |
Chart |
News |
PowerRating).
Goldman downgrades the Bells, BLS,
(
VZ |
Quote |
Chart |
News |
PowerRating) and
(
SBC |
Quote |
Chart |
News |
PowerRating). A thought — we used
to laugh and sell into any “upgrade” knowing that these houses were
merely unloading stock into the rallies. Is the time approaching when we need to
start fading their downgrades? Are the sheep now running in the opposite
direction? Just a thought.
We’ve got a heavy day on the economic front today. Personal spending and
personal income have already been released, with personal income coming in flat,
far below consensus estimates of a 0.4% gain. Personal spending rose 1.0% vs.
consensus estimates of a 0.8% rise. More debt anyone? At approximately 08:50 CDT
August final Michigan sentiment will be released, consensus estimates call for a
reading of 88. At 09:00 CDT Chicago PMI will be released, 52.2 is the consensus
estimate. Either of those numbers could move the market a great deal.
This is where I usually make my month-end mark-up speech and talk about how
disgusting it is. Now it is merely boring. I fully expect a rally today because
of month-end, and if we don’t get one, it will be a tell. Use any ridiculous
strength to unload stocks/buy puts. Bank and biotech shares have had
particularly good months, so look for them to try to shove those higher. Oil and
oil service stocks are a possibility as well. I do not like the chart patterns I
see in oil stocks, and if they jam those higher, I will be buying puts.
Volatility
Volatility got off to a strong start yesterday, but settled back as the
market recovered. On the day, the VIX gained .10 to 36.32, the VXN rose 1.53 to
55.05, and the QQV fell .02 to 47.29.
New Actions (New Recommendations)
(
QQQ |
Quote |
Chart |
News |
PowerRating) — Buy the September 24/27 1:2 (buy one September 24 call, sell two September
27 calls) for $.50 (50%).
DJX — Buy the September 88/92 1:2 (buy one September 88 call, sell two
September 92 calls) for $.50. (50%).
Working Orders (Old Recommendations)
(
C |
Quote |
Chart |
News |
PowerRating) — Old Citigroup options (CLTs), sell the September 30 puts at $.75
against the long December 30 puts that we were left with as a result of August
expiration. This is away right now.
Working Rolls/Adjustments
None.
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 (50%).
(
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%).
Short-term
Call Positions
None.
Call Spread Positions
None.
Put Positions
None.
Spread Positions
(
C |
Quote |
Chart |
News |
PowerRating) — Long the December/August 30 put calendar spread at $1.70 (25%).
August puts expired worthless, now long the December puts at $1.70.
C — Long the December/September 30 put calendar spread at $1.00 (25%).
C — Long the January/September 30 put calendar spread at $1.20(50%).
(
MMM |
Quote |
Chart |
News |
PowerRating) — Long the October 110/120 put spread at an average price of $2.65
(100%).
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