Asia, Europe, Melting Down
While we had a day off, the market was getting hammered overseas,
leading to a sharply lower opening this morning. The first casualty was in Asia,
where the Nikkei dropped 3.2% to close at 9217, almost a 20-year low. It seems
like it was just the other day it was above 10,000. In Europe a two-day slide is
under way, with Germany leading the way lower. Currently, the DAX is 109.93
points, or 3.05%, lower, and is down over 5.5% for the last two days. The FTSE
100 is 95.70 points, or 2.29%, lower, while the CAC40 is 57.05 points, or 1.74%,
lower.
The catalyst for the falls in Europe were today’s Italian consumer confidence
numbers which hit a three-year low, leading to broad-based selling of shares. In
the US, downgrades of several key stocks have added to the selling pressure.
Citigroup
(
C |
Quote |
Chart |
News |
PowerRating) has been downgraded by PruBache from a hold to a sell with a
$28.00 price target, Ford
(
F |
Quote |
Chart |
News |
PowerRating) has been downgraded by UBS Warburg from a hold
to a reduce, Morgan Stanley cut its earnings estimates on Goldman Sachs
(
GS |
Quote |
Chart |
News |
PowerRating),
and negative comments regarding Intel
(
INTC |
Quote |
Chart |
News |
PowerRating) are coming from Lehman’s Dan
Niles.
Currently, DJI futures are 122.0 points lower, S&P futures are 14.50 points
lower, and Nasdaq 100 futures are 16.50 lower. Interest rate futures are sharply
higher and the dollar is sharply lower. Crude is lower and gold is about $1.50
higher at $313.50 an ounce.
Keep your offers in the Citigroup (CLT) September 30 puts (see working orders,
below), and dial the ratio call spreads one strike lower (for example, the
September 24/27 1:2 ratio call spread now becomes a September 23/26 1:2 ratio
call spread, and the DJX September 88/92 1:2 ratio call spread now becomes a
September 86/90 1:2 ratio call spread). We will be looking for retail stocks to
short today.
Volatility
Volatility was down across the board Friday, but not a lot. The VIX
lost .53 to 35.79, the VXN fell .07 to 54.98, and the QQV slipped 91 to 46.38.
Volatility is still well bid, all things considered.
New Actions (New Recommendations)
Shorting some retailers today.
Working Orders (Old Recommendations)
C — Old Citigroup options (CLTs) — sell the September 30 puts at $.75 against
the long December 30 puts that we were left with as a result of August
expiration. This should be close this morning.
(
QQQ |
Quote |
Chart |
News |
PowerRating) — Buy the September 23/26 1:2 (buy one September 24 call, sell two September
27 calls) for $.50 (50%).
DJX — Buy the September 86/90 1:2 (buy one September 88 call, sell two
September 92 calls) for $.50. (50%).
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.
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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