Are Things As Bad As We Said?
When
we got into office, the thing that surprised me the most was
that things were as bad as we’d been saying they were.
John
F. Kennedy
Uncle
Alan and his fellow FOMC members gave the markets what the bulls wanted and
every talking head on CNBC, CNNFN, The Wall Street Journal and the like
couldn’t wait to tell us that investor’s reaction was muted. Muted, you
know, subtle, subdued, low-key, or restrained, anything but euphoric. Perhaps
that’s because, as President Kennedy said, “…things were as bad as we’d
been saying they were.†Additionally, many market observers wondered if this
latest cut didn’t signal the end to the Fed’s interest rate
reductions.
That was before the April CPI report this morning, which showed that consumers
were not seeing significant increases in the costs of most goods and services.
This is due in part to the largest decline in clothing costs in more than 50 years.
In other words, the Fed has more room to move on interest rates, as inflation is
in check and thus, weakness in the economy will continue to be the primary focus
of the Fed. That’s why were seeing triple-digit gains by the Dow and similar
strong performance from the Naz, despite significant pre-market weakness for
both indices.
Now in case there is someone out there that hasn’t heard, Krispy
Kreme
(
KREM |
Quote |
Chart |
News |
PowerRating) had a very sweet earnings report. Come on, at least
I didn’t say they were rolling in dough! Anyway, the specialty retailer of
premium quality doughnuts (read FAT BOMBS) has done very well for itself and its
shareholders lately. So before any of you nail me with negative e-mails about
what I’m about to write, let me say I love the company and their product.
However, the recent run may have overextended the stock and created an
opportunity to play for a breather if not an outright correction.
I like buying the June 55 puts for $3.8 and selling a like number of June 45
puts for $1.10. A net debt of $2.70 for a 10-point put spread is always
attractive and a minor correction back to the high 40’s could double your
investment.
| Calls
|
Bid
|
Ask
|
Vol
|
Puts
|
Bid
|
Ask
|
Vol
|
| 01 Jun 45.00 |
13.5
|
14.3
|
143
|
01 Jun 45.00
|
1.1
|
1.15
|
266
|
| 01 Jun 50.00
|
9.7
|
10.2
|
162
|
01 Jun 50.00
|
2
|
2.4
|
427
|
| 01 Jun 55.00
|
6
|
6.5
|
329
|
01 Jun 55.00
|
3.4
|
3.8
|
403
|
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