Dow Upgrades Pump Futures
U.S. stocks are rallying overseas as Citigroup
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C |
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PowerRating), two DJI components, have picked up upgrades this morning. Also, statements by
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regarding a pickup in sales and
(
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PowerRating) forecasting faster revenue growth have lit a
fire under the futures markets. Currently, the DJI futures are 99.0 better, S&P
futures are 9.90 higher, and the Nasdaq 100 futures are 22.50 higher. In Europe,
the FTSE 100 is 68.40 points, or 1.69%, higher, the DAX is up 125.14 points, or
4.03%, and the CAC 40 is up 94.62 points, or 3.10%. In Asia, the Nikkei squeaked
out a 31.22 point, or .36%, gain, and the Hang Seng rose 131.20 points, or 1.35%.
Interest rate futures are higher, presumably on the back of a Washington Post
story saying that interest rates will be cut again before the year’s end. Crude
futures are unchanged, gold futures are about $1.90 higher, and the dollar is
higher against most major foreign currencies.
There is little to stand in the way of a move higher at the moment, so it is
best to play matador and stand aside while we wait for opportunities. The selloff in oil and oil service stocks may provide us with some good long entry
possibilities, particularly in the oil service area. For right now, the charts
in that area look bad, and we will have to wait for further concessions in
price, or improvement in the charts, whichever come first.
Why are we not buying if we think there is a strong chance that the market will
rally the next couple of weeks? Because this is a bear market! A
cockroach-climbing-the-wall market, and while it looks impressive climbing the
wall at a nice steady pace, it falls all at once (see Cigna Friday), and we
don’t want to be caught when the music stops.
VolatilityÂ
Volatility is really starting to collapse. Friday
the VIX fell 3.63 to 36.27, its lowest level since early September, the VXN
dropped 4.19 to 50.39, and the QQV dove 4.32 to 42.63. Expect more downside
pressure as market makers drop their bids in response to inventory buildup. We
are holding long (option) positions in
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PowerRating) and
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PowerRating), and we will look to
flip them into either calendar spreads or vertical spreads at some point in
order to lower exposure to volatility.
Â
Update:Â (10/25/02)
BGEN — Bought the January 40 calls at $2.00 (marked at $2.10), 25%.
WAG — Bought another 25% of the January 35 puts at $2.00, raising us to a 50%
position at an average cost of $2.50.
MER — Unable to execute the MER January/November 35 put calendar spread at
$1.10 — cancel it, we will play the 37.5 strike next week.
New Recommendations
BGEN — For those who bought the January 40 calls, sell the January 45
calls at $1.00 to slip into the January 40/45 call spread for $1.10.
Working Orders (Old Recommendations)
QQQ — Those who sold the January 23/26 call spread at $1.50, bid $1.80
for the January 20/23 call spread (somewhere near $23.00 should get you done).
Recap of open trades
Long-term
Reverse Collars
CIEN — Long the January 2.5/5 reverse collar at
$.40 (25%).
Buy-writes
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
None.
Directional Positions
None.
Short-term
Call Positions
BGEN — Long the January 40 calls at $2.10 (25%).
CCU — Long the January 40 calls at $2.00 (25%). Sold half at $4.00 on
10/21/02.
Call Spread Positions
QQQ — Short the January 23 /26 call spread at $1.50 (25%).
Put Positions
WAG — Long the January 35 puts at $2.50 (50%).
Spread Positions
None.
Stops
None.
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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,
comparisons, recommendations, statistics or other technical data will be
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