Semis Cranking Up Again…
Futures
are higher this morning with bullish reports coming out of Bear
Stearns regarding the semiconductor sector and positive comments out of Merrill
Lynch on the economy. Overseas, Europe was quiet with the FTSE up 0.3% and the
DAX up 0.9%, while in Asia, the Nikkei was lower by 1.3% and the Hang Seng was
up 0.2%.
With the exception of continued sector gyrations (semis look to be hot today,
and biotechs might be bottoming), the market will probably continue to chop
ahead of tomorrow’s FOMC announcement. No rate change is expected, but a bias
change could be in the offing, sending a strong signal as to the Fed’s view of
the economy.
In the options world, all eyes will be on the VIX, VXN and QQV as it appears
that a new lower-volatility range may be forming. Keep it light and nimble as we
are heading into a semi-holiday period.
We have been working as
scale buyers in the
(
SMH |
Quote |
Chart |
News |
PowerRating) April 45 puts. If the SMH trades above $48.00 or
the
(
$SOX.X |
Quote |
Chart |
News |
PowerRating) trades above $608.00, back off and wait for the smoke to
clear. At this point, we have a 20% position at a price of $2.10.
Volatility
Volatility continues to
get crushed, and it is looking like we are on the verge of shifting to new lower
ranges in volatility. This seems odd given the current environment, but I
learned a long time ago that the market is always right. Please review my
comments regarding implied volatility in this weekend’s Intrinsic Value.
The VIX closed down 1.25 at 20.77, the VXN closed down 2.07 at 40.26 and the QQV
closed down 2.47 at 33.81. These are all multi-month, if not multi-year lows. Could
Nasdaq volatility be going back to pre-bubble levels?
Trade Updates
(3/15/02)
We bought the Chiron
(
CHIR |
Quote |
Chart |
News |
PowerRating) July 50 calls at $3.30 (50%).
We bought the SMH April 45 puts at $2.10 (20%).
Current Recommendations/Working Orders
Exxon Mobil
(
XOM |
Quote |
Chart |
News |
PowerRating) — Sell the July 40 calls at $5.00 to close the position.
Qualcomm
(
QCOM |
Quote |
Chart |
News |
PowerRating) — Sell the April 40/50 call spread at $5.00 (50%).
Semiconductor HOLDRs
(
SMH |
Quote |
Chart |
News |
PowerRating) — Begin making scale purchases of the SMH April
45 puts into $48.00 overhead resistance. We started at $2.10, and we are lightly
making purchases into $48 resistance, 20% at a crack.
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.
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%), settled at $.35 credit.
Buy-writes
(
HAL |
Quote |
Chart |
News |
PowerRating) — long the July 20 buy-write at $15.00
(50%), settled at $15.72.
HAL — Long the July 17.5 buy-write at $14.50 (50%), settled at $14.875.
Proxy buy-writes
None.
Complex Strategies
(
WMT |
Quote |
Chart |
News |
PowerRating) — Long the March 60 straddle at $3.30
(100%). We have finished selling stock against the position and are now
"one to one" short stock vs. calls. Closed 3/15/02, $.30 loss.
Short-term
Call Positions
(
APC |
Quote |
Chart |
News |
PowerRating) — Long the May 60 calls at $1.75 (50%), settled at $1.85.
(
CPN |
Quote |
Chart |
News |
PowerRating) — Long the April 12.5 calls at $1.20 (50%), settled at $.90.
(
MLNM |
Quote |
Chart |
News |
PowerRating) — Long the May 25 calls at $2.40 (50%), settled at $2.80.
(
XOM |
Quote |
Chart |
News |
PowerRating) — Long the July 40 calls at $3.00 (25%), settled at $4.40.
Call Spread Positions
(
DYN |
Quote |
Chart |
News |
PowerRating) — Long the March 30/40 1:2 call ratio spread @ $1.50. Closed
3/15/02, $1.50 loss.
(
QCOM |
Quote |
Chart |
News |
PowerRating) — Long the April 40/50 call spread at $2.50 (100%), settled at
$3.60.
(
TLAB |
Quote |
Chart |
News |
PowerRating) — Long the March 17.5/22.5 call spread at $.80 credit average
(50%). Closed 3/15/02, $.80 profit.
Put Positions
(
AZO |
Quote |
Chart |
News |
PowerRating) — Long the April 60 puts at an effective cost of $2.125 (50%).
Settled at $.55.
Put Spread Positions
AZO — Long the March 55/65 put spread @ 2.125 (25%). Sold 25% on 3/5/02 at
$3.00, the balance expired worthless on 3/15/02 for a net loss of $.625. Fifty
percent was "rolled" into the April 60 puts (see long put positions
above).
Stops
None.
|
Click
|
- 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