Lower Opening, Backing Into The Fed
Markets are set to open lower this morning. Currently, DJI futures are
trading 115 points lower, S&P 500 futures are trading 13.00 lower, and
Nasdaq 100 futures are about 10.50 points lower. The U.S. Airways bankruptcy,
SSB cutting earnings estimates on Intel
(
INTC |
Quote |
Chart |
News |
PowerRating), a Wal-Mart downgrade, and
weakness overseas are all contributing factors.
In Europe, the FTSE 100 is down 92.50 points, or 2.14%, the DAX is down 105.77
points, or 2.81%, and the CAC 40 is down 87.92 points, or 2.55%. In Asia, the
Nikkei dropped 251.97 points, or 2.52%, while the Hang Seng fell 54.14
points, or .54%. Interest rate futures are trading higher, while crude is
slightly lower. The dollar is sharply lower against both gold and the major
currencies.
It looks as though it is starting to dawn on investors that the Fed will
probably not lower rates, although I wouldn’t rule out anything from "Easy
Al" and his magical printing press. It would be a smart move by the Fed NOT
to lower rates now, so they could continue to dangle that carrot in front of the
markets whenever anything got rough. Banks should back off a bit today after the
frantic short covering they have seen. Continue to work the calendar spread
orders.
Volatility
Volatility continued lower Friday, with the VIX losing .43 to 39.36,
the VXN falling .65 to 58.70, and the QQV dropping 1.03 to 49.15. Vol should get
a boost today and tomorrow pre-Fed, probably a great shorting opportunity for
you vol players. We will look to set up some more ratio call spreads if the
market backs off and vol gets pumped in the next 1.5 days.
Trade Updates (8/09/02)
Nothing Friday.
New Actions (New Recommendations)
(
C |
Quote |
Chart |
News |
PowerRating) — Buy the January/September 30 put calendar spread at $1.20
(50%).
Working Orders (Old Recommendations)
(
MMM |
Quote |
Chart |
News |
PowerRating) — Buy another 25% of the MMM October 110/120 put spread at $2.00.
Closer.
(
MMM |
Quote |
Chart |
News |
PowerRating)(2) — Sell half the MMM October 110/120 put spread at $5.50. Far away
now.
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 $2.50 (25%).
Short-term
Call Positions
None.
Call Spread Positions
(
DJX |
Quote |
Chart |
News |
PowerRating) — Long the August 86/90 call ratio spread 1:2 for $.50 (50%).
(
QQQ |
Quote |
Chart |
News |
PowerRating) — Long the August 26/28 1:2 call ratio spread for even money (25%).
(
QQQ |
Quote |
Chart |
News |
PowerRating) — Long the August 26/28/30 "Christmas tree" at $.35 (25%).
Put Positions
None.
Spread Positions
(
C |
Quote |
Chart |
News |
PowerRating) — Long the December/August 30 put calendar spread at $1.70 (25%).
(
C |
Quote |
Chart |
News |
PowerRating) — Long the December/September put calendar spread at $1.00 (25%).
(
MMM |
Quote |
Chart |
News |
PowerRating) — Long the October 110/120 put spread at an average price of $2.87
(75%).
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