Gerstner Gone, IBM Begins Telling The Truth
Futures were slightly lower on the
back of the news that Iraq is planning to suspend oil exports for one month.
However, futures are now screaming lower on the back of the warning from IBM
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IBM |
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for Q1. IBM is saying it now expects to report EPS of $0.66-$0.70
vs. consensus of $0.85. The stock has traded as much as $9.00 lower in
pre-market trading, and of course, this will set off a huge domino effect in the
shares of anything to do with computers. DJI futures are 55 points lower, while
the S&P 500 futures are down about 13.50 points, and the Nasdaq 100 futures
are down about 30 points.
Although a lot of people saw this coming, this bombshell will undoubtedly
unnerve traders and investors as the major indices were already teetering
on the edge of intermediate trendlines. Look for a substantial pop in implied
volatilities and probably some flight into “established” stocks
(although IBM was one of them).Â
Â
As I said in Friday’s closing commentary: “One more PeopleSoft
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PSFT |
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one more accounting scandal, and this market might be sleeping with the fishes.”
Well, here it is! This is a big helping of bad news, and it will be interesting
to see how the market swallows it.
Volatility
The VIX closed down .66Â Friday at 21.11, but the other volatility
indices, the VXN and the QQV, closed higher, which is very unusual for a Friday
after the employment numbers because market makers will usually mark down
volatility after the uncertainty of the employment reports is removed. The fact
that volatility was higher is an indication of the weakness in those sectors of
the market.
Trade Updates (4/05/02)
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BAC |
Quote |
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PowerRating) — STILL nothing done on the BAC spread.
Working.
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JNJ |
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News |
PowerRating) — Per the intraday alert, we bought the January 60 puts at $3.30
(50%). We will be looking to add on weakness.
(
ORCL |
Quote |
Chart |
News |
PowerRating) — We made no more purchases of the ORCL June 12.5 calls today.
Working Orders (Old Recommendations)
BAC — Buy the August/May 65 put calendar spread (buy the August 65 puts and
sell the May 65 puts) for $1.50 or better (50%).
ORCL — Traders may begin making scale-down purchases of the June 12.5 calls,
looking to slowly build a long position at an average price of $1.25 or less. We
are looking to add another 20% at $1.00.
New Actions (New Recommendations)
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WMT |
Quote |
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PowerRating)Â — Buy an additional 25% of the WMT June 60 puts at $2.50 as WMT
challenges its recent gap.
Rolls/Adjustments
Chiron
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CHIR |
Quote |
Chart |
News |
PowerRating) — Investors long the July 50 calls at $3.30 (50%)
may sell the July 60 calls against their positions at $1.00. This will roll us
into the July 50/60 call spread at $2.30.
Disney
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DIS |
Quote |
Chart |
News |
PowerRating) — The Disney roll we have been recommending has moved
away as the stock has declined. Investors long the April 22.5/25 reverse collar
at a $1.15 credit (75%) may hold if they are willing to take delivery of the
stock at $21.35 (22.50 short put strike – 1.15 credit). If not, look to
liquidate the position on the next bounce.
On The Horizon…
Depending on how the market holds (or doesn’t) next week, we may have to go into
full bear mode.
Recap of open trades
Long-term
Reverse Collars
DIS — April 25/22.5 reverse collar (long the April 25 calls, short the April
22.5 puts) at a $1.15 credit (75%).
Buy-writes
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HAL |
Quote |
Chart |
News |
PowerRating) — Long the July 20 buy-write at $15.00 (50%).
HAL — Long the July 17.5 buy-write at $14.50
(50%).
Proxy buy-writes
None.
Complex Strategies
None.
Directional Positions
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JNJ |
Quote |
Chart |
News |
PowerRating) — Long the January 60 puts at $3.30
(50%).
Short-term
Call Positions
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APC |
Quote |
Chart |
News |
PowerRating) — Long the May 60 calls at $1.50(100%).
(
CHIR |
Quote |
Chart |
News |
PowerRating) — Long the July 50 calls at $3.30
(50%).
(
CPN |
Quote |
Chart |
News |
PowerRating) — Long the May 15 calls at $.40 (50%).
(
MLNM |
Quote |
Chart |
News |
PowerRating) — Long the May 25 calls at $2.40
(50%).
(
ORCL |
Quote |
Chart |
News |
PowerRating) — Long the June 12.5 calls at $1.30
(40%).
Call Spread Positions
None.
Put Positions
(
AZO |
Quote |
Chart |
News |
PowerRating) — Long the April 60 puts at an effective cost of $2.125 (50%).
(
BAC |
Quote |
Chart |
News |
PowerRating) — Long the August 65 puts at $3.00
(25%) — part of a spread “leg” to be completed later.
(
SMH |
Quote |
Chart |
News |
PowerRating) — Long the April 45 puts at an average
price of $1.76 (30%).
(
WMT |
Quote |
Chart |
News |
PowerRating) — Long the June 60 puts at $3.00
(25%).
Spread Positions
None.
Stops
None.
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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
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- Supporting documentation for claims,
comparisons, recommendations, statistics or other technical data will be
furnished upon request. One or more of the contributors to these
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- It is important to note that the options
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