Opening Unchanged To Lower…
Non-farm payroll numbers are clearly bearish and have rolled the
futures over. The headline numbers were bad enough (unemployment rate of 6% vs.
an expected 5.8%, and non-farm payrolls +43k vs. an expected +80k), but drilling
down a little deeper, we find further disappointment. Hourly earnings rose only
0.1% vs. an expected 0.3%, and the average workweek dropped to 34.1 vs. an
expected 34.3.
The market will get hit today on these numbers. All eyes are on the SOX index as
it teeters above 500. I received an e-mail from a subscriber noting that the SOX
was beaten back from its 200-day moving average (approximately 536) rather
easily yesterday. That was a good observation, and the action yesterday is very
telling. I think the funds that hold chip stocks are starting to feel fear, and
are looking to get out. Normally a penetration of the 200-day moving average
would have triggered a “punish the shorts” ramp job, but I think the
funds are now looking for the exit in the chip stocks.
I expect the SOX to get blasted below 500 early, and then for a number of
short-covering events to force it back to that level. At some point today, we
will add to our SMH put positions.
Volatility
The VIX crept higher yesterday, picking up .07 to 22.38 (DJI up). The
VXN and QQVÂ closed higher again as the Nasdaq rout continued. The VXN
picked up .61 to 44.52, while the QQV gained .68 to 38.10. All things being
equal, volatility should get smacked today (after a large economic report it
normally does). If it is does not — look out!
General Outlook
No change. We are viewing any rallies as bear market rallies. Running from the
Nasdaq to the Dow is merely running from one end of the Titanic to the
other at the present time. We will have to play “matador” with the DJI
stocks while the herds are running in to them.
(
GM |
Quote |
Chart |
News |
PowerRating),
(
MMM |
Quote |
Chart |
News |
PowerRating), etc., might
get pushed to absurd levels here.
Trade Updates (5/02/02)
(
SMH |
Quote |
Chart |
News |
PowerRating) — We bought a 25% position in the June 40 puts at
$2.00. We are looking to add another 25% at a) $550.00 in the SOX or b) on a
close of the SOX below $500.00.
Working Orders (Old Recommendations)
(
AOL |
Quote |
Chart |
News |
PowerRating) — Buy the October 20 buy-write at $16.30 (25%).
(
HAL |
Quote |
Chart |
News |
PowerRating) — Holders of the HAL July 20 buy-write, work to sell the HAL July
17.5/20 call spread at $1.00. This will “roll” the position into the
July 17.5 buy-write.
(
CHIR |
Quote |
Chart |
News |
PowerRating) — Sell all of the July 50 calls at
$1.00 to close position.
(
MLNM |
Quote |
Chart |
News |
PowerRating) — Sell all of the May 25 calls at $.50 to close position.
(
MER |
Quote |
Chart |
News |
PowerRating) — Buy the May/July 40 put calendar spread at $1.25 (50%).
(
MSFT |
Quote |
Chart |
News |
PowerRating) — Buy the May/July 50 put calendar (buy the July puts, sell
the May puts) at $1.25 (50%).
New Actions (New Recommendations)
(
QQQ |
Quote |
Chart |
News |
PowerRating) — Once again, buy the June 33 puts
(25%) against the $32.10 level.
(
SMH |
Quote |
Chart |
News |
PowerRating) — Buy the June 40Â puts (25%)Â against the $550.00 level in
the SOX, or on a close below $500.00 in the SOX.
Rolls/Adjustments
None.
On The Horizon…
Biotech, broker-dealer, software shorts on a bounce, gold, natural gas,
oil service longs on a pullback.
Recap of open trades
Long-term
Reverse Collars
None.
Buy-writes
(
AMR |
Quote |
Chart |
News |
PowerRating) — Long the August 25 buy-write at $22.00 (50%).
(
AOL |
Quote |
Chart |
News |
PowerRating) — Long the July 22.5 buy-write at
$19.40 (50%).
(
HAL |
Quote |
Chart |
News |
PowerRating) — Long the July 20 buy-write at $15.00
(50%).
HAL — Long the July 17.5 buy-write at $14.50
(50%).
(
SEBL |
Quote |
Chart |
News |
PowerRating) — Long the August 27.5 buy-write at
$23.00 (50%).
Proxy buy-writes
(
DYN |
Quote |
Chart |
News |
PowerRating) — Long the January 15/June 20 proxy buy-write at $3.20 (50%).
Complex Strategies
None.
Directional Positions
(
JNJ |
Quote |
Chart |
News |
PowerRating) — Long the January 60 puts at $3.30
(50%).
Short-term
Call Positions
(
APC |
Quote |
Chart |
News |
PowerRating) — Long the May 60 calls at $1.50 (100%).
(
CHIR |
Quote |
Chart |
News |
PowerRating) — Long the July 50 calls at $3.30
(50%).
(
CPN |
Quote |
Chart |
News |
PowerRating) — Long the May 15 calls at $.40 (50%).
(
MLNM |
Quote |
Chart |
News |
PowerRating) — Long the May 25 calls at $2.40
(50%).
Call Spread Positions
None.
Put Positions
(
BAC |
Quote |
Chart |
News |
PowerRating) — Long the August 65 puts at $3.00 (25%) — part of a spread
“leg” to be completed later.
(
DJX |
Quote |
Chart |
News |
PowerRating) — Long the June100 puts at an
effective price of $2.75(50%).
(
SMH |
Quote |
Chart |
News |
PowerRating) — Long the June 40 puts at 2.00 (25%).Â
(
WMT |
Quote |
Chart |
News |
PowerRating) — Long the June 60 puts at $2.50
(37.5%).
Spread Positions
(
BAC |
Quote |
Chart |
News |
PowerRating) — Long the August/May 65 put calendar at $1.50 (50%).
Stops
None.
|
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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
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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
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- 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
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- Note: All individuals must have read the ODD
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