Keep Your Powder Dry And Your Stops Tight
Even though this is a holiday week (England out
today, half days at most futures exchanges Friday, and everyone else heading for
the hills ASAP ahead of Labor Day), it is also a very important week. After
virtually no economic news last week, we are chock-o-block with numbers this
week. Kicking things off today we have July new home sales and existing homes
sales this morning at 09:00 CDT. New home sales are expected to show a drop from
1001k to 978k, but existing home sales are expected to rise from 5.07m to 5.3m.
“Housing Bubble” fans will be watching closely.
Currently, futures are pointing to a higher open this morning. DJI futures at
the CBOT are 42.0 points better, S&P futures are up about 4.50 points, and
Nasdaq 100 futures are showing about an 8.00 point gain. Interest rate futures
are lower, the dollar is showing a slight gain against the majors, and crude oil
and gold are roughly unchanged.
In Europe, the FTSE is not open today as England celebrates a Bank Holiday, but
the DAX is up 47.91 points or 1.25%, and the CAC 40 is up 12.48 points, or .35%.
In Asia, the Nikkei climbed above 10,000 with a 200.29 point, or 2.03% gain,
while the Hang Seng dropped 19.36 points, or 19%. Brazil is higher at the
moment.
Most of the major indices start the day just above their 50-day moving
averages, which should supply good support after Friday’s setback. Expect
traders to step in and buy above these levels. Despite all of the economic data
out this week, volume will undoubtedly drop off dramatically after Wednesday as
people get the jump on the long weekend. Keep your powder dry and your stops
tight, and look for the market to tell you its next move.
Volatility
On Friday, implied volatility caught a rare bid on the back of market weakness.
The VIX rose 1.85 to 32.81, the VXN jumped 2.62 to 47.62, and the QQV was up
2.87 to 41.07. Implied volatility is pretty much fairly priced again, given the
movement taking place in the markets. Neither a buy nor a sell here, but the
trend is down.
Trade Updates (8/23/02)
None — we are now watching this break closely to see how buyers will
react to it next week. By the end of the week, our game plan should start to
take shape.
New Actions (New Recommendations)
None. Watching retailers for shorts, semis too. Rollups soon.
Working Orders (Old Recommendations)
None.
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