Markets Poised To Open Higher Despite Oracle, War

March 4, 2002
Tony Saliba

We are still on hold regarding further scale-up put purchases in the
(
QQQ |
Quote |
Chart |
News |
PowerRating)s.
The QQQs had a very strong day Friday, and for the first time in many moons, we
did not get instant gratification from our put purchases, prompting us to
"cease and desist" midday, per the Alerts! The QQQs traded down to
about $35.25 late Friday after the Oracle announcement, but have bounced back. I
assume they will test that level today, and then we will find out what they are
made of. Hold the QQQ puts previously purchased, but do not add at this point.

Volatility

Volatility got absolutely annihilated last week.
Friday the VIX finished down 1 point at 22.13 after punching out a new intraday
low for the year at 21.33.

The VXN got crushed, settling on the absolute low
tick at 41.94, down 4.25 on the day. The VXN is on new lows for the year and is
lower than any time since 1999.

The QQV was also pounded, finishing down 3.56 and
nearing its lows for the year. Volatility levels this low indicate that Friday’s
rally may not last.

Trade Updates (today)

QQQ — We purchased April 35 puts against the
34.26, 34.50 and 34.97 areas. For the first time in recent memory, we didn’t get
instant gratification, and we halted any further put-buying activities per the
intraday Alert! We are left holding a chunk of QQQ April 35 puts at an average
price of $2.00. If we do not see a downside reversal by Tuesday at the latest,
we will exit the trade.

Current Recommendations

AutoZone
(
AZO |
Quote |
Chart |
News |
PowerRating) — Per Friday’s Alert! Investors long the March
55/65 put spread (100%) should place orders to sell 25% at $3.00 and another 25%
at $4.00.

No other new recommendations at this time. Please
review the intraday Alerts regarding Gilead Sciences
(
GILD |
Quote |
Chart |
News |
PowerRating). We are looking
for an entry on the long side.

Rolls/Adjustments

Disney
(
DIS |
Quote |
Chart |
News |
PowerRating) — Investors long the April
22.5/25 reverse collar (long the April 25 calls, short the April 22.5 puts) at a
$1.15 credit (75%) may want to consider the following roll: Buy the Disney
April 22.5 put/April 27.5 collar (buy the April 22.5 puts, sell the April 27.5
calls) for zero. This will "roll" you into the DIS April 25/27.5 bull
call spread at a $1.15 credit.

Schlumberger
(
SLB |
Quote |
Chart |
News |
PowerRating) — Investors long the SLB May 55/60 call spread at $1.50
may purchase the May 60/65 call spread at $1.30 to roll into the May 55/65 call
spread at a cost of $2.80.

Recap of open trades

Long-term

Reverse Collars

DIS — April 25/22.5 reverse collar (long the
April 25 calls, short the April 22.5 puts) at a $1.15 credit (75%).

Buy-writes

(
HAL |
Quote |
Chart |
News |
PowerRating) — long the July 20 buy-write at $15.00
(50%).

Proxy buy-writes

None.

Complex Strategies

(
WMT |
Quote |
Chart |
News |
PowerRating) — Long the March 60 straddle at $3.30
(100%).

Short-term

Call Positions

AHC – Long the May 70 calls at $3.70 (25%).

XOM – Long the July 40 calls at $3.00 (25%).

Call Spread Positions

(
DYN |
Quote |
Chart |
News |
PowerRating) — Long the March 30/40 1:2 call ratio spread @ $1.50.

(
SLB |
Quote |
Chart |
News |
PowerRating) — Long May 55/60 call spread at $1.50 (50%).

(
QCOM |
Quote |
Chart |
News |
PowerRating) — Long the April 40/50 call spread at $2.50 (100%).

(
TLAB |
Quote |
Chart |
News |
PowerRating) — Long the March 17.5/22.5 call spread at $.80 credit average (50%).

Note: This spread is a result of a reverse collar roll.

Put Positions

(
SMH |
Quote |
Chart |
News |
PowerRating) — Long the April 40 puts at $2.11 average cost (75%).

(
QQQ |
Quote |
Chart |
News |
PowerRating) — Long the April 35 puts at an average cost
of $2.00 (50%), taking partial profits at support, reloading on rallies.

Put Spread Positions

(
AZO |
Quote |
Chart |
News |
PowerRating) — Long the March 55/65 put spread @ 2.125 (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
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

Markets Poised To Open Higher Despite Oracle, War

BUY THE FEAR, SELL THE GREED

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