The Big Enchilada
Another delightful whipsaw seems to
be forming as post-close news revealed that the SEC probe of
(
IBM |
Quote |
Chart |
News |
PowerRating)‘s accounting
has been concluded. IBM is currently trading up about $3.50 in pre-market
trading. On the economic front, retail sales rose .2% vs. .4% consensus,
however, ex-auto was up .4%, in line with expectations. PPI rose 1%, much higher
than the expected .6%, but the core PPI (ex- food and energy) rose only 1.0%, which
was in line with expectations. (Who needs food or energy anyway?)
The big enchilada will be the University of Michigan Consumer Sentiment report
due at 8:50 a.m. CDT. Expectations are for a jump to 96.8 from 95.7. Since the market
is 90% a confidence game at this point, this will be an important number, and I
would lay low until then.
Oil prices are getting ripped on the overthrow of Venezuela’s Chavez. This
should give airlines and chemicals a nice bump, and oil and oil service stocks
should be under pressure. The wild card is still in the Mideast, where anything
could happen.
Buy-write time?
The recent sell-off in the markets and jump in implied volatilities is creating
some opportunities for buy-writes in selected stocks. We are scanning and will
send out recommendations via the Alerts! system. Volatility isn’t screaming the
way we like it, but we think that volatility is moving to a lower trading range
and is an attractive sale in SOME stocks.
Today
The market will probably just flop around into the University of Michigan
number. It looks like the bulls are trying to circle the wagons, and the dog and
pony show on "Bubblevision" is in full force today. Shorts should use
any weakness prior to the Michigan number to take some PARTIAL profits.
Volatility
Volatility continues to be volatile. The VIX cruised to a 2.11
gain yesterday, tagging its 50-day moving average at 22.55 before settling
at 22.33. The VXN closed up 1.60 at 43.67, and the QQV stormed up to 38.51, up
1.75 on the day.
Trade Updates (4/11/02)
(
BAC |
Quote |
Chart |
News |
PowerRating) — Nothing done on the BAC spread. We are very
close, reenter tomorrow.
(
WMT |
Quote |
Chart |
News |
PowerRating) — We bought another 25% of the June 60 puts at $2.00. This brings us to a
75% position at an average cost of $2.50.
Nothing else done today.
Working Orders (Old Recommendations)
(
BAC |
Quote |
Chart |
News |
PowerRating) — Buy the August/May 65 put calendar spread (buy the August 65 puts and
sell the May 65 puts) for $1.50 or better (50%).
New Actions (New Recommendations)
(
QQQ |
Quote |
Chart |
News |
PowerRating) — Buy a 25% position in the QQQ May 35 puts against the 34.50-34.80
area in the QQQ.
(
SMH |
Quote |
Chart |
News |
PowerRating) — Buy another 20% of the SMH May 40 puts against the $45.00 area in the
SMH.
(
WMT |
Quote |
Chart |
News |
PowerRating) — Buy an additional 25% of the WMT June 60 puts at $1.50 as WMT
challenges its recent gap.
Rolls/Adjustments
Chiron
(
CHIR |
Quote |
Chart |
News |
PowerRating) — Investors long the July 50 calls at $3.30 (50%) may
sell the July 60 calls against their positions at $1.00. This will roll us into
the July 50/60 call spread at $2.30.
On The Horizon…
We will be buying QQQ puts and SMH puts on bounces into resistance, and
executing buy-writes in selected stocks.
Recap of open trades
Long-term
Reverse Collars
None.
Buy-writes
(
HAL |
Quote |
Chart |
News |
PowerRating) — Long the July 20 buy-write at $15.00 (50%).
HAL — Long the July 17.5 buy-write at $14.50 (50%).
Proxy buy-writes
None.
Complex Strategies
None.
Directional Positions
(
JNJ |
Quote |
Chart |
News |
PowerRating) — Long the January 60 puts at $3.30 (50%).
Short-term
Call Positions
(
APC |
Quote |
Chart |
News |
PowerRating) — Long the May 60 calls at $1.50(100%).
(
CHIR |
Quote |
Chart |
News |
PowerRating) — Long the July 50 calls at $3.30 (50%).
(
CPN |
Quote |
Chart |
News |
PowerRating) — Long the May 15 calls at $.40 (50%).
(
DIS |
Quote |
Chart |
News |
PowerRating) — Long the April 25 calls at $.85 credit (result of "roll").
(
MLNM |
Quote |
Chart |
News |
PowerRating) — Long the May 25 calls at $2.40 (50%).
(
ORCL |
Quote |
Chart |
News |
PowerRating) — Long the June 12.5 calls at $1.20 (60%).
Call Spread Positions
None.
Put Positions
(
AZO |
Quote |
Chart |
News |
PowerRating) — Long the April 60 puts at an effective cost of $2.125 (50%).
(
BAC |
Quote |
Chart |
News |
PowerRating) — Long the August 65 puts at $3.00 (25%)
— part of a spread "leg"
to be completed later.
(
SMH |
Quote |
Chart |
News |
PowerRating) — Long the May 40 puts at $1.35 (20%). Scale-up buyers of more.
(
WMT |
Quote |
Chart |
News |
PowerRating) — Long the June 60 puts at $2.50 (75%).
Spread Positions
None.
Stops
None.
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- 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