Potential Turning Point?
Stocks look set to open lower this morning,
slowly sliding into the opening. WorldCom finally went belly-up yesterday, and
that headline is being screamed by thousands of publications, so I don’t need to
waste time on it. What I would like to point out is that intermediate highs and
lows are usually tied to some sort of climactic event. Could the WCOME
bankruptcy be a turning point? We shall see.
3M has beat earnings and raised guidance. (Is it just me, or do they raise
guidance every week?) The stock is mildly higher. We own put spreads in 3M, and
we were very close to taking partial profits on Friday. We will monitor the
stock today to see if we should lower our put spread offers. Another company in
which we have a position, Amgen
PowerRating) is trading higher this morning on
reports that its anemia drug Aranesp has received federal approval for use in
treating anemia associated with chemotherapy. We will also evaluate our
remaining bearish positions in this stock to see if we need to liquidate.
In Europe, the market was lowerÂ on follow through from our wipeout Friday.
The FTSE is down 0.9% at 4061 and the DAX is 2.1% lower at 3807. In Asia, the
Nikkei was slightly lower, but the Hang Seng dropped 2.1% to 10,110.
We intend to keep the market at arm’s length today and manage what we have. I am
still looking for tradable rallies in the
some of their subcomponents. Any option strategies involving these underlyers
will be of the ratio call variety (like the strategies we already have in the
On Friday the VIX climbed back to the highs, closing at 43.46, up 3.50, its
highest close since Sept. 21, 2001. On the other hand, the VXN dropped 2.44 to
61.17, and the QQV fell 1.54 to 53.12. Psst — volatility is letting you in on a
little secret: The Nasdaq is sneaky strong (relatively). Don’t look now, but the
biotech index (BTK) closed 5.29% higher on the week — don’t tell anyone.
Trade Updates (7/19/02)
PowerRating) — We exited our August 25 buy-writes at $15.00 by exercising
the July 15 puts we had purchased as protection. The put cost $.70, so the total
loss is $7.70 on the position. The August 25 calls are offered at $.05, and
those should be covered also. (I recommend buying half as many of the August
17.5 calls at $.10.)
PowerRating) — We were very close to taking partial profits in our October 110/120
put spreads. In light of 3M beating earnings and raising guidance (for the
umpteenth time), we are evaluating our offers on this spread.
PowerRating) — We exited our August 27.5 buy-writes at $10.00 by exercising the
July 10 puts we had purchased for protection. The put cost $.35, so the total
loss is $13.35, our biggest hit of the year.
New Actions (New Recommendations)
Working Orders (Old Recommendations)
Recap of open trades:
TGT (2) — Long the January 30/35 put spread at $.58 (37.5%). This due to
adjustment on 7/16/02.
Call Spread Positions
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- Also note that spread strategies involve
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considerations to all options transactions, the investor considering options
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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
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