Opening Lower
Nonfarm payrolls came in worse than expected this morning (6k vs. an
expected 60k) causing a minor sell off in the futures and the dollar, but the
market is rallying back as I write this. The headline rate was unchanged at
5.9%. Hourly earnings came in +.3% vs. expectations of +.2%, and personal income
came in better than expected (+ .6% vs. an expected + .5%), and personal
spending came in less than expected ( + .5% vs. an expected + .6%). At 09:00 CDT
we have June factory orders due to be released, with consensus expectations of a
1.7% decline. This number could be a market mover, so be on your toes.
I don’t really know what to expect today, but one thing I do know as an option
trader is that volatility tends to get stomped after Friday economic reports,
especially in August. If we are sitting around midday and volatility is
unchanged or well bid, that would lead me to believe that the market has a lot
more downside coming later in the day. If the market is substantially lower and
volatility is soft, I will be looking for a reversal, and so on. Volatility is
an excellent key on days when economic reports are released.
As far as directional trades go. Anywhere near unchanged is a “no trade zone”
for me, and I will be getting involved only after a substantial rally or
substantial sell off — looking to fade either!
As usual — I bought some T-bond puts this morning as my back-door way to play a
possible rally. I will usually exit these in one to two trading days.
Volatility
Yesterday volatility took a substantial jump. The VIX jumped 6.28 to 41.49, the
VXN rose 2.49 to 60.35, and the QQV rose 1.60 to 50.72. Investors were truly
freaked by the weakness of yesterday’s economic numbers, and ran like hell for
puts. Even though I don’t really follow it, it will be interesting to see what
today’s put / call ratio looks like!
Error
A reader wrote to inquire as to what
happened to the Citigroup
(
C |
Quote |
Chart |
News |
PowerRating) put calendar spreads because they were not
listed under “Open Positions.” The answer is that I screwed up and forgot to
list them. My apologies.
Trade Updates (Thursday 8/01/02)
BAC – Missed the boat – back burner for now.
New Actions (New Recommendations)
CIEN – Buy the January 2.5 / 5 reverse collar (buy the calls, sell the
puts) for $.40 debit (you pay) – for Speculators only!
Orders (Old Recommendations)
BAC – Buy the January 50 / 60 put spread at $2.00 (25%).
MMM- Buy another 25% of the MMM October 110 / 120 put spread at $2.00.
Working
Rolls/Adjustments:
None
Recap of open trades:
Long-term
Reverse
Collars:
Buy-writes:
AOL – long the July 22.5 buy-write at $19.40 (50%). July has expired,
looking to roll into January ’03.
AOL -long the October 20 buy-write at $16.30 (25%).
HAL -long the January 15 buy-write at $12.05 (100%).
Proxy buy-writes:
DYN – long the January 15 calls at $3.20 – left over from proxy buy-write
(50%). Left for dead.
Complex Strategies:
None
Directional Positions:
AMGN – long the January 30 /40 put spread at $2.50 (50%).
BAC – Long the January 50 / 60 put
spread at an average price of $2.75 (50%).
Short-term
Call Positions:
None
Call Spread Positions:
QQQ – Long the August 26 / 28 1:2 call ratio spread for even money (25%).
QQQ – Long the August 26 / 28 / 30 “Christmas tree” at $.35 (25%).
Put Positions:
IWM – Long the August 70 puts at $2.00 (25%).
Spread Positions:
C – Long the December / August 30 put calendar spread at $1.70 (25%).
C – Long the December / September put calendar spread at $1.00 (25%).
MMM – Long the October 110 / 120 put spread at an average price of $2.87 (75%).
Stops
AOL – Two consecutive
closes below $10.00 or one close below $9.64.
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Good luck with your trading today.
Tony