A Bounce (Sell It!)
It looks as though we are going to start Triple Witching day with a
slight bounce on the back of some good news from Qualcomm
PowerRating) which said
yesterday that it expected ship 20 million chips this quarter, up from previous
estimates of 18 to 19 million. In Europe, where a Triple Witching day is already
under way, the market has been very volatile with rumors of a trading error in
the FTSE 100 futures that caused a nearly 7% jump in the price of the index from
the lows at one point. Intra-market arbitrageurs took the rest of Europe higher
with it, and I’m sure we’ll hear more about this trade as the day wears on.
In Europe, the FTSE 100 is currently up 98.60 points, or 1.46%, the DAX is
higher by 70.94, or 2.35%, and the CAC 40 is up 16.92 points, or .58%. In Asia,
the Nikkei dropped 188.54 points, or 1.95%, and the Hang Seng fell 99.57 points,
or 1.06%. Currently, DJI futures are 52.0 better, the S&P futures are 7.80
higher, and the Nasdaq 100 futures are 11.50 higher. Interest rate futures are
lower, the dollar is higher, and crude oil is roughly unchanged, as is gold.
With that in mind, and given the explosion back up in the various volatility
indicators, we are preparing to gradually take some profits, please see the
recommendations below. Although some of our bearish positions are just now
making some money (I was too early, as usual), we have to be ready with profit
targets because as you may remember from late July, when redemptions occur, they
are violent and quick, and we must have our orders in the market ahead of time.
Watch for easing chatter to surface ahead of next Tuesday’s FOMC meeting. Also,
keep your eyes open for intervention. As long as we are imitating Japan, we
might as well go all the way and begin manipulating stock prices. Expiration is
the best time to do it. The best way to detect intervention is by watching the
currency and bond markets. If you see the dollar suddenly strengthening, or
interest rate futures suddenly collapsing, there is probably some sort of government-sponsored
program about to be launched.
Well, I might be made a liar on my prediction that we have seen the
highs for this year in volatility. Yesterday the VIX exploded up to 46.16, a
5.27 point gain, the VXN rose 3.43 to 62.76, and the QQV was up 2.64 to 53.63.
These are new highs for the month of September, and we are set to inspect the
Working Orders (Old Recommendations)
Recap of open trades
Call Spread Positions
DJX — Long the September 86/90 1:2 ratio call spread at $.50 (50%).
C — Long the January/September 30 put calendar spread at $1.20 (50%). Sold
half at $2.45 on 9/16/02.
- 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
- 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