Lower, Europe Dumps
Futures are lower this morning due
to several factors. First, in Europe, the IFO institute said its index of
western German business confidence dropped to 88.8 from 89.9 in July, indicating
that the recovery in Germany is faltering. Today’s reading puts the index at a
six-month low. Currently the DAX is down about 117.00 points, or 3.00%.
Adding to the gloom, Nortel
(
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PowerRating) is warning that Q3 sales will fall as much
as 10% from Q2 levels, and they will cut another 7000 jobs. Nortel said last
month that revenue would be unchanged in Q3. Also, Goldman is out saying that
Sun Microsystems
(
SUNW |
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PowerRating) will likely cut revenue and profit forecasts during
their update tomorrow due to weakness in IT spending. On the plus side, Hewlett
Packard
(
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PowerRating) is trading up after reporting in line earnings last night, and
Amgen
(
AMGN |
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PowerRating) is also higher after receiving EC approval for its Aranesp and
Neulasta drugs.
Currently, DJI futures are 50.0 lower, S&P futures are 6.70 lower, and
Nasdaq 100 futures are 12.00 lower. Bond futures are sharply higher, the dollar
is basically unchanged, crude is lower, and gold is higher. In Europe, the FTSE
100 is 102.80 points, or 2.31%, lower, as mentioned above, the DAX is 117.00
points, or 3.0% lower, and the CAC 40 is 105.66 points, or 2.96%, lower. In
Asia, the Nikkei lost 140.57 points, or 1.42%, and the Hang Seng fell 55.27
points, or .54%.
Red Flags
There were several red flags popping yesterday:
Red flag number 1: The market was dropping before the consumer
confidence number — a bad reaction to a great durable goods number. A bad
reaction to good news is a tell.
Red flag number 2: Several semiconductor/equipment stocks are sniffing their
July lows.
Red flag number 3: The leader on the way up, the biotechs, have rolled over
badly.
It is looking like it is time to begin strapping on the Viking helmet again. We
are approaching the usual month-end circus, and we will use any bogus rallies
occurring in the next few days to establish/roll short positions. Retailers,
semis, broker-dealer stocks and the DJX are on the list.
Volatility
Volatility rose yesterday in sympathy with the selloff in the market,
but not to an outrageous degree. The VIX gained .43 to 32.72, the VXN rose 1.59
to 50.01, and the QQV rose 1.04 to 43.40.
Trade Updates (8/27/02)
It’s almost time…
New Actions (New Recommendations)
(
C |
Quote |
Chart |
News |
PowerRating) — 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 is away right now.
Working Orders (Old Recommendations)
None.
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
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- 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
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