Gold Higher = Market Lower
Futures are on their heels this morning as the
assault on the dollar, led by gold, continues. Currently, DJI futures are down
85.0, S&P futures are down 7.00, and Nasdaq 100 futures are off by 11.50 (all
basis March). In Europe, the FTSE 100 is lower by 65.20 points or 1.66%, the DAX
is down 37.53 points or 1.21%, and the CAC 40 is off 44.87 points or 1.83%. In
Asia, the weakening dollar is taking its toll. The Nikkei lost 192.62 points or
2.21%, and the Hang Seng fell 85.35 points or .87%. Interest rate futures are
lower even though the market is lower (dollar selling), the dollar is lower
against the major foreign currencies, gold futures are sharply higher, and crude
futures are showing about a $.25 gain.
We have the University of Michigan numbers around 08:45 CST, and that could be a
market mover. It is expected to come in at 85. The stage clearly belongs to
gold/the dollar today, and what the market does will be dictated by what the
dollar/gold does. So look for the old “inverse trade” where the market and gold
move in opposite directions. I am looking for a real whippy affair, and the
possibility looms large that the “year-end rally” gang might be preparing to
throw in the towel real soon. If that happens, under current light volume
conditions, it could get ugly fast.
As I mentioned yesterday, there are rumored to be several investment banks with
large derivative exposures in gold, and I would keep a sharp eye on them. JPM,
BAC and C are in that mix. Puts may be in order in these names.
Volatility
Volatility continued its slide yesterday, and all three of the indices
broke back below their 200-day moving averages. The VIX lost .59 to close at
30.81, the VXN fell .57 to 51.05, and the QQV dropped .44 to 42.99.
Update:Â (12/12/02)
CIEN — Sold our January 5/7.5 call spreads at $1.05 to close.
PG — Bought the April 75/85 put spread at $2.50 to open.
New Recommendations
DIA — (For tomorrow) — Sell half of the December 80/84/86/90 call
condor at $3.00 to close.
PG — Buy another 25% of the April 75 /85 put spreads (buying the April 85 puts,
selling the April 75 puts) at $2.00.
Working Orders (Old Recommendations)
CIEN — Sell the entire January 5/7.5 call spread at $1.05 (to close).
Filled!
KSS — Sell half of our January 50/60 put spreads at $5.00 (to close).
PG — Buy the April 75/85 put spread at $2.50 (25%). Filled!
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
Long-term
Reverse Collars
None.
Buy-writes
None.
Proxy buy-writes
DYN — Long the January 15 calls at $3.20 — left over from proxy buy-write
(50%). Left for dead.
Complex Strategies
BGEN — Long the January 40/45 box (25%).
Directional Positions
None.
Short-term
Call Positions
GILD — Long the January 40 calls at an average price of $1.60 (50%).
HD — Long the January 25 calls at $2.00 (25%).
Call Spread Positions
CIEN — Long the January 5/7.5 call spread at $.05 (25%). Sold
at $1.05 12/12/02.
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
None.
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%).
PG — Long the April 75/85 put spread at $2.50 (25%).
Stops
GILD — $34.50 closing only.
KSS — Two consecutive closes over $74.00.
|
|
- 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