A Shade Better — Month End Ya Know

Futures are up a hair this morning in what is
expected to be extremely light trade. The one thing we have to be aware of is
that it is the last day of the month, and although they did a great job jacking
stocks to smithereens on Wednesday, they may “go for the gusto” yet today, and
push them higher. There are no economic reports out this morning, and it is
probably a great day to miss.

Currently, DJI futures are up 2.0, S&P futures are up 1.80, and Nasdaq 100
futures are up 5.50. In Europe, the FTSE 100 is down  21.60 points or .52%, the
DAX is up 8.24 points or .25%, and the CAC 40 is down 9.69 points or .29%. In
Asia, the Nikkei gained 38.78 points or .42%, while the Hang Seng fell 77.97
points or .77%. Interest rate futures are slightly higher this morning (yields
lower), the dollar is showing slight losses against the major foreign
currencies, and crude and gold futures are currently closed.

Today is a half-day everywhere. Thank you to the stock exchanges for giving up a
half-day of commissions and allowing us to visit our children. Again, if you
don’t have to play today, don’t — it will be open again Monday.

Volatility — What Was Up With The VIX Wednesday?

No doubt many of you were wondering — as I was — what the heck was
going on with the VIX index Wednesday afternoon. It went streaking higher late
in the day which seemed highly unusual given the market was up huge. I had a lot
of thoughts running through my mind: Terrorists buying puts ahead of some
attacks on Thursday and Friday? Firms buying puts knowing they had pushed stocks
to ridiculous levels? Well, it turned out that a very large short was being
forced by his/her clearing firm to purchase calls against the short position,
and on a Wednesday before Thanksgiving, you are not going to find a hell of a
lot of liquidity. Therefore, volatility got pumped on light volume as market
makers kept raising their offers. On the day, the VIX rose 2.10 to 30.84,
breaking through its 10 day MA at 29.52. Again, I’d write this off as an

The VXN slid .57 to 47.42, and the QQV
dropped .17 to 41.07.

Update: (11/27/02)

BGEN — We sold the remaining January 40/45 call
spreads at $3.00 to close the position.

SMH — Holders of the SMH December 30 calls (who are probably cursing me right
now) should have sold them on Wednesday’s open around $1.25. This is a small
profit for those who got them at $1.00, but we never got an “official” fill, so
we will not list this trade.

WAG – We sold the remaining January 30/35 put spreads at $4.00 to close the

New Recommendations

QQQ — If Tuesday’s lows ($26.90) are not taken out by next Friday, we
will cover the short January 23/26 call spreads.

Working Orders (Old Recommendations)

HAL — Sell the Halliburton January 15 buy-write at $14.50 to close.

QQQ — Subscribers short the January 23/26 call spread at $1.50 (25%), leave an
order in the market to purchase the spread at $1.50 to close the trade.

Recap of open trades


Reverse Collars



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


Directional Positions



Call Positions

GILD — Long the January 40 calls at an average price of $1.60 (50%).

Call Spread Positions

BGEN — Long the January 40/45  call spread at $1.25 (25%). Closed
out at $3.00 11/27/02.

CIEN — Long the January 5/7.5 call spread at $.05 (25%).

DIA — Long the December 80/84/86/90 call condor at $1.20 (25%).

QQQ — Short the January 23/26 call spread at $1.50 (25%).

Put Positions


Put Spread Positions

BAC — Long the January 60/70 put spread at $2.90 (25%).

KSS — Long the January 50/60 put spread at $2.475 (50%).

WAG — Long the January 30/35 put spread at $1.00 (25%). Closed out at
$4.00 11/27/02.


GILD — $34.50 closing only.

KSS — Two consecutive closes over $74.00

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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
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  • Supporting documentation for claims,
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  • 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
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