How Low Can It Go?
Stocks are poised to open slightly higher on
Merrill Lynch’s view that the economic upturn will cause a rise in corporate
profits. However, this is pre-announcement season and tech investors may be a
little timid.
Asian markets were mixed as Japan fell to a three-week low, Taiwan closed +1.3%,
and Korea suffered its biggest drop in six weeks. Europe was slightly higher,
with the DAX +.76 % and the FTSE +.56%.
At 9:00 a.m. CST, Existing Home Sales is due out, -540,000 is expected (5.5
million units). Last month’s figure was 6.04 million units.
At 10:30 a.m. CST Federal Reserve member Hoening speaks at the University of
Nebraska.
Volatility
The VIX is now probing the lows of August of
2000, settling at 19.62, down .36 on the day. The VXN actually settled up
.59 at 37.56, and the QQV settled .22 lower at 31.65. How low
can it go?
I REPEAT: Although volatility may be undergoing a structural
change, we still consider volatility levels this low to be a red flag and a
cause for concern! If you are exposed to the market and are concerned,
puts could not be any cheaper, make use of them!
Trade Updates (3/22/02)
Current
Recommendations/Working Orders
I recommend buying the Bank of America
(
BAC |
Quote |
Chart |
News |
PowerRating)
August/May 65 put calendar spread in or around the $1.50 level (only 50%
of unit).
(
SMH |
Quote |
Chart |
News |
PowerRating) — Traders long SMH puts on a
scale-up basis, take partial profits near $45.00 support.
(
QQQ |
Quote |
Chart |
News |
PowerRating) — Traders long QQQ puts on a scale-up
basis, take partial profits near $36.00 and $35.40 support.
Rolls/Adjustments
Chiron
(
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
(
DIS |
Quote |
Chart |
News |
PowerRating) — Investors long the April
22.5/25 reverse collar (long the April 25 calls, short the April 22.5 puts) at a
$1.15 credit (75%) may want to consider the following roll: Buy the Disney
April 22.5 put/April 27.5 collar (buy the April 22.5 puts, sell the April 27.5
calls) for zero. This will "roll" you into the DIS April 25/27.5 bull
call spread at a $1.15 credit.
Recap of open trades
Long-term
Reverse Collars
(
DIS |
Quote |
Chart |
News |
PowerRating) — 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
(
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.
Short-term
Call Positions
(
APC |
Quote |
Chart |
News |
PowerRating) — Long the May 60 calls at $1.75
(50%).
(
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%).
Call Spread Positions
None.
Put Positions
(
AZO |
Quote |
Chart |
News |
PowerRating) — Long the April 60 puts at an
effective cost of $2.125 (50%).
(
QQQ |
Quote |
Chart |
News |
PowerRating) — Long the April 36 puts at an average
price of $1.00 (20%).
(
SMH |
Quote |
Chart |
News |
PowerRating) — Long the April 45 puts at an average
cost of $1.76 (60%).
Put Spread Positions
None.
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