Market Higher On ‘Unenjoyment’ Report
Stock futures are higher (at the moment) on the
back of better-than-expected payroll numbers. The headline unemployment rate
fell from 5.7% to 5.6%, much better than the consensus expectation of 5.9%. However,
non-farm payrolls actually fell 43k vs. an expected rise of 9k (I don’t
get it either). The big numbers that the Street is chirping about are the hourly
workweek (up to 34.3 vs. an expected 34.1) and hourly earnings (up 0.3% vs. an
expected 0.2%). Treasuries are taking it on the chin at the moment with the
short-dated maturities (those most affected by Fed policy) really getting
smacked. December eurodollar futures are down 12bp and November Fed Funds
futures are down 7.5 bp. It looks as though today’s report has removed some of
the easing speculation built into those contracts.
Currently, DJI futures are up 47.0 points, S&P futures are up 4.90 points,
and the Nasdaq 100 futures are up 10.50 points. They are all quite a bit off of
their highs made immediately after the report. In Europe, the FTSE 100 is 50.20
points, or 1.29%, lower, the DAX is 40.98 points, or 1.46%, lower, and the CAC
40 is 45.95 points, or 1.61%, lower. In Asia the Nikkei rose 91.12 points, or
1.02%, and the Hang Seng gained 67.02 points, or .75%. As I mentioned, interest
rate futures are sharply lower, the dollar is sharply higher, crude oil futures
are unchanged, and gold futures are about $1.00 lower.
In corporate news, Schering-Plough
(
SGP |
Quote |
Chart |
News |
PowerRating) warned, reducing its forecast for
this year and next. EMC warned that earnings and revenue for Q3 would be lower
than expected.
Based on the activity I am seeing in the interest rate futures markets, I would
say that this market has a good chance to rally today — not that I would get
married to it. Maybe the weakness in the treasuries is the first leg of an asset
allocation switch, and the second leg, buying equities, will take place later
today. If that turns out to be the case, be careful of an early ramp up, but
there may be a good selling opportunity when the smoke clears. As always,
monitor volatility (and the treasury markets) for a clue.
Volatility
Yesterday the VIX climbed 1.60 to 44.96, the VXN rose .06 to 58.21, and
the QQV fell .23 to 49.74. The intraday volatility is unbelievable right now,
and these levels are probably justified as we head into earnings season next
week.
P.S.
I will be updating our stop-loss levels for our short positions later today.
Update: (10/03/02)
Nothing done here, but those of you who missed the
(
KSS |
Quote |
Chart |
News |
PowerRating) spread the
other day should have gotten filled today.
New Recommendations
(
BAC |
Quote |
Chart |
News |
PowerRating) — Sell half of the January 50/60 put spread at $5.00 (still
a bit away). As an alternative, you may buy the January 50/60 call spread at
$4.95, which will put you into the January 50/60 box, a neutral position.
(
KSS |
Quote |
Chart |
News |
PowerRating) — Sell the remaining January 60/70 put spreads at $7.00 to close the
position. As an alternative, you may buy the January 60/70 call spread at $2.95,
which will put you into the January 60/70 box, a neutral position.
Working Orders (Old Recommendations)
(
BP |
Quote |
Chart |
News |
PowerRating) — Buy the October/January 40 put calendar spread (buy the
January 40 puts, sell the October 40 puts) at $1.20 (25%).
(
CCU |
Quote |
Chart |
News |
PowerRating) — Bid $1.50 for another 25% of the January 40 calls.
(
IBM |
Quote |
Chart |
News |
PowerRating) — Sell half of the January 50/60 put spread at $4.00.
(
KSS |
Quote |
Chart |
News |
PowerRating) –Sell half of the January 60/70 put spread at $6.00. Filled
10 /01/02.
(
S |
Quote |
Chart |
News |
PowerRating) — Sell half of the January 35/45 put spread at $6.00
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
(
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%).
(
KSS |
Quote |
Chart |
News |
PowerRating) — Long the January 60/70 put spread at $3.00 (12.5%).
(
S |
Quote |
Chart |
News |
PowerRating) — Long the January 35/45 put spread at $3.00 (25%).
Short-term
Call Positions
(
CCU |
Quote |
Chart |
News |
PowerRating) — Long the January 40 calls at $2.50 (25%).
Call Spread Positions
None.
Put Positions
None.
Spread Positions
(
MMM |
Quote |
Chart |
News |
PowerRating) — Long the October 90/100/110 put butterfly at $1.45 (25%).
Stops
BAC — $70.10, close only.
IBM — $65.00, close only.
KSS — $67.75 close only.
S — $43.60 close only.
MMM butterfly — no stop.
|
|
- 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