Lower Open
Pre-market
indicators are that the market will open lower but off the worst
levels of the morning. The main factors puting the market on the defensive are
Merck revenue concerns, WCOM fallout and a general cautious stance of the market
after Friday’s large rally.
The Wall Street Journal
reported that MRK’ s Medco unit reported $12 billion in revenues that it never
collected. This revenue accounted for approximately 10% of MRK’s earnings. MRK
is down $3 in pre-market.
The WCOM fallout includes the effects
on the overall Internet if WCOM’s UU-NET internet unit goes out of business ,
WCOM effects on commercial real estate with continued layoffs, more slowdown on
telecom equipment orders, more banking problem revelations, due WCOM debt
defaults and the possible negative impact of Congressional hearings today.
There is a slew of earnings due out
this week with analysis focusing more on third quarter guidance than second
quarter earnings.
President Bush will speak hawkishly
tomorrow regarding corporate accountability.
International markets were generally
lower pre-market.
Volatility
As expected, volatility got crushed today, with the VIX losing 3.10 to
30.21, the VXN dropping 3.78 to 56.28, and the QQV dropping 4.07 to 47.88. If
you are interested in playing an intermediate-term rally with options, be aware
that volatility is still extremely high on a historical basis, and buying calls
may not make you any money, even if the market moves higher. Ratio call spreads
are the way to play this market for an upside move. (See I.V. 3’s 57& 58).
Trade Updates (Friday 7/05/02)
None
New Actions (New Recommendations)
None
Working Orders (Old Recommendations)
AMGN – Sell half of the January 30 /40 put spread at $5.00.
IWM – Sell half of the November 80 /90 put spread at $5.00
BAC – Continue to offer half of the August 70 puts at $5.00.
CHIR- Sell all CHIR July 50 calls at $1.00 to close.
Rolls/Adjustments:
SEBL – For those long the SEBL August 27.5 buy-write: Buy the SEBL
August 27.5 calls (to close) ans sell the November 20 calls (to open) for $2.00
credit.
Recap of open
trades:
Long-term
Reverse
Collars:
Buy-writes:
AMR – long the August 25 buy-write at $22.00 (50%). Long July 15 puts at
$.70.
AOL – long the July 22.5 buy-write at $19.40 (50%).Long July 10 puts at $.30.
AOL -long the October 20 buy-write at $16.30 (25%).Long July 10 puts at $.30.
HAL -long the October 17.5 buy-write at $13.25 (100%).
SEBL – long the August 27.5 buy-write at $23.00 (50%).Long July 10 puts at $.35.
Proxy buy-writes:
DYN – long the January 15 calls at $3.20 – left over from proxy buy-write
(50%).
Complex Strategies:
None
Directional Positions:
AMGN – Long the January 30 /40 put spread at $3.00 (25%).
TGT – Long the January ’03 35 puts at $2.58 (75%).
Short-term
Call Positions:
CHIR – Long the July 50 calls at $3.30 (50%).
Call Spread Positions:
None
Put Positions:
BAC – Long the August 70 puts at $2.60 (100%). Sold 10% at $5.00, 6/26/02.
Spread Positions:
IWM – Long the November 80 /90 put spread at $3.00 (25%).
MMM – Long the October 110 / 120 put spread at $2.80 (100%).
SMH – Long the July / August 32.5 put spread at $.70 (25%).
Stops
None.