Lower Open
European weakness, Iraq jitters, and
rising gold and oil prices are spooking the market this morning. The fact that
the one-year anniversary of the Sept. 11, 2001, attacks is on a lot of people’s
minds may give the market pause as well. (I hope we mark it by blasting Saddam
to hell.) Currently, DJI futures are 58.0 lower, S&P futures are 5.90 lower,
and Nasdaq 100 futures are 8.00 lower. Interest rate futures are higher, and
both crude oil and gold are up. The dollar is unchanged.
In Europe, the FTSE 100 is 46.50 points, or 1.14%,
lower, the DAX is down 79.41 points or 2.28%, and the CAC 40 is 37.79 points, or
1.16%, lower. Statements by Wim Duisenberg, president of the ECB, ruling out
rate cuts to spur economic growth is taking its toll on European equities this
morning. In Asia, the Nikkei rose 177.19 points, or 1.94%, and the Hang Seng
gained 2.81 points, or .03%.
In pre-open action this morning, Citigroup (C) is back in the news, removing
Michael Carpenter as chief executive of its investment bank and reassigning him
to the Global Investment Group. The Salomon Smith Barney unit has been under
increasing fire for their shady practices during the bubble years. And last but
not least, Pimco’s Bill Gross saying that fair value for the DJI is 5000 is
spooking investors.
Volatility
Volatility got annihilated Friday. The VIX dropped 2.19 points to
40.04, the VXN fell 4.18 points to 56.54, and the QQV got smashed, falling 4.12
points to 47.17. Those of you who put on the ratio call spreads in the DJX and
the QQQ had a front row seat for the volatility wipeout. Even though the DJX
gained 1.43 points and the QQQ gained .68 points, our calls barely budged.
Update: (09/06/02)
No joy Friday, although we were close on the Kohl’s spread. Next week:
some put calendar spreads for oil stocks and (gasp!) we want to go long CCU
(maybe)!
New Actions (New Recommendations)
None.
Working Orders (Old Recommendations)
(
MMM |
Quote |
Chart |
News |
PowerRating) — Sell 25% of the October 110/120 call spread at $4.00 and 25% at
$5.00 (away now).
Retailer Shorts (getting closer!)
Kohl’s
(
KSS |
Quote |
Chart |
News |
PowerRating): On an approach to the 70.00 area, buy the January
60/70 put spread for $3.00 or less (25%).
Sears
(
S |
Quote |
Chart |
News |
PowerRating): On an approach to the 47.00 area, buy the January 35/45 put spread
for $3.00 or less (25%).
Walgreen’s
(
WAG |
Quote |
Chart |
News |
PowerRating): On a rally into the 35 -37 area, buy the January 25 puts
outright, beginning at the $2.50 level or less (25%).
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
DJX — Long the September 86/90 1:2 ratio call spread at $.50 (50%).
(
QQQ |
Quote |
Chart |
News |
PowerRating) — Long the September 23/26 1:2 ratio call spread at $.50 (50%).
Put Positions
None.
Spread Positions
(
C |
Quote |
Chart |
News |
PowerRating) — Long the December/September 30 put calendar spread at $.975 (50%).
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.
|
|
- 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