Sharply Higher Opening — Will It Hold?

  • July 5, 2002
  • Tony Saliba

It looks like the fact
that there were no major terrorist attacks (except the incident at LAX, which
may or may not have been one) has given the market something to hang its hat on.
Futures are still sharply higher this morning even though they have backed off
somewhat in response to bearish payroll numbers. Currently, DJI futures on the
CBOT are up 73 points after having been up as much as 123 points. On the CME,
S&P 500 futures are up 10.60 points after having been up more than 16 points.
The Nasdaq 100 futures on the CME are ahead by 21.00 points after having been
more than 44 points higher at one time.

June non farm payrolls rose 36k versus consensus expectations of 94k, and the
headline rate rose to 5.9% from 5.8%, in line with expectations. The average
work week came in at 34.3 hours, in line, and hourly earnings were up .4%,
greater than expected.

In Europe, the FTSE was 1.7% better and the DAX was screaming, up 2.6%. In Asia,
the Nikkei was up 1.8%, and the Hang Seng rose .4%.

Although I saw no official intervention, the dollar is firmer across the board,
and interest rate futures are lower.

Volatility

On Wednesday volatility was off a bit, but still held relatively firm
because of the threat of terror attacks. Now that we have passed through the
holiday with no terror attacks and the market is higher, volatility should get
spanked. On Wednesday the VIX was down .38 to 33.31, the VXN actually gained .49
to 60.06, but the QQV fell 1.50 to 51.95.

Trade Updates (Wednesday 7/03/02)

JNJ – Sold the remaining January ’03 50 puts at $3.60.

We got withing a hair of taking partial profits on our Amgen (AMGN) and IWM put
spreads. Re-enter the orders today.

New Actions (New Recommendations)

None

Working Orders (Old Recommendations)

AMGN – Sell half of the January 30 /40 put spread at $5.00.

IWM – Sell half of the November 80 /90 put spread at $5.00

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

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

Rolls/Adjustments:

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 calls at $3.20 – left over from proxy buy-write
(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%). Sold half at $3.90 on
7/1/02, sold balance at $3.60 on 7/3/02.

TGT – Long the January ’03 35 puts at $2.58 (75%).

 

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.