Opening Better

Futures have
flip-flopped from negative to positive
. 3M pre-announced better than
expected 2Q earnings of $1.33 vs/ consensus expectations of $1.25. The company
cited stronger sales, especially in Asia Pacific and ongoing productivity and
cost reductions. This should give a nice bump to the DJI. We have some short
positions in 3M (long the October 110 / 120 put spread), we’ll have to see how
the stock closes. As you know by now, it’s what the charts say, not what the
analysts say that counts.

Currently, DJI futures at the CBOT are up 45.0 points, S&P 500 and Nasdaq 100
futures at the CME are up 3.0 points and 3.50 points respectively, and the
Russell 2000 futures, also at the CME are approximately unchanged.Later this
morning June auto and truck sales are due to be released, with  consensus
expectations of 6.0M and 7.2M respectively. At 09:00 CDT June ISM index is set
to be released with a consensus expectation of 55.5. May construction spending
will also be released at 09:00 CDT, expected to come in +.2%.

What’s the plan? Not much. Sit back and watch the market for any significant
behavior such as a good response to bad news or a bad response to good news. I
am particularly interested in how 3M will react to its extremely good news. Will
MMM rocket taking the rest of the DJI with it, or will it gap higher and peter
out as investors look for an elegant exit? We will see.

As I stated in this last weekend’s “Intrinsic Value” there is no law stating
that you have to trade. Sometimes the best trades are none at all, which may
prove to be the case this week.

One Last Thing…

A reminder to anyone who bought U.S. T-bond puts last
Wednesday — time to get out!

Volatility

Volatility got crushed Friday, but came backlate. The VIX lost 89 to
29.13 after posting an intraday low of 28.60, the VXN fell 5.18 to 57.95, and
the QQV lost 3.17 to 49.29. Once again, next week is a holiday week and
volatility should remain soft, all else being equal.

Trade Updates (Friday  6/28/02)

Nothing done.

New Actions (New Recommendations)

BAC – Continue to offer half of the August 70 puts at $5.00.

Working Orders (Old Recommendations)

CHIR- Sell all CHIR July 50 calls at $1.00 to close.

Rolls/Adjustments:

DYN – Holders of the DYN January 15 call / June 20 call proxy buy-write
(long the January 15 calls, short the June 20 calls at $3.20), buy the June 15
calls (to open) and sell the September 17.5 calls (to open) for $1.00 credit (to
you).

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%).

AOL – long the July 22.5 buy-write at $19.40 (50%).

AOL -long the October 20 buy-write at $16.30 (25%).

HAL -long the October 17.5 buy-write at $13.25 (100%).

SEBL – long the August 27.5 buy-write at $23.00 (50%).

Proxy buy-writes:

DYN – long the January 15 / June 20 proxy buy-write at $3.20 (50%).

Complex Strategies:

None

Directional Positions:

AMGN – Long the January 30 /40 put spread at $3.00 (25%).

JNJ- Long the January 50 puts at $1.70 credit (37.5%).

TGT – Long the January ’03 35 puts at $2.40 (50%).

 


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.