Sharply Lower On Bombing
A suicide bombing attack on the U.S. consulate in Karachi, Pakistan,
has the market set to open sharply lower this morning. Currently, DJI
futures are 80 lower, S&P futures are about 12 lower, Nasdaq 100 futures are
26.50 lower, and Russell futures are 10.00 lower. In addition to the terrorist
attacks, warnings and downgrades are raining down upon the market this morning.
Merrill has downgraded Sprint PCS
(
FON |
Quote |
Chart |
News |
PowerRating), Nextel
(
NXTL |
Quote |
Chart |
News |
PowerRating), and AT&T
wireless
(
AWE |
Quote |
Chart |
News |
PowerRating), and Deutsche gas downgraded Qualcomm
(
QCOM |
Quote |
Chart |
News |
PowerRating), which is
trading about $4.00 lower at the moment.
Adobe
(
ADBE |
Quote |
Chart |
News |
PowerRating) lowers guidance and Genesis
(
GNSS |
Quote |
Chart |
News |
PowerRating) also lowered its first
quarter revenue forecast, causing the stock to trade below $9.00 (it was near
$70 not too long ago, but hey, what wasn’t?).
Adding to the fire, the U.S. dollar is sharply lower, making new lows for the
move as the euro has now broken through the .95 level. Gold is higher also.
As I said in yesterday’s closing commentary, it is starting to look like the
market may have done a collective Wile E. Coyote and run off the cliff and is
just now looking down…
Volatility
Once again, volatility showed a little strength yesterday, but not
much. The VXN put in new highs for the move, but overall, still no sign of panic
or climactic selling. The VIX gained 1.72 to 28.73, the VXN gained 1.44 to
54.30, but the QQV lost .51 to 46.79.
Trade Updates (6/13/02)
(
GM |
Quote |
Chart |
News |
PowerRating) — We sold some of our January ’03 60 puts at $7.60 and
$7.70. They aren’t the most liquid option in the world, so we will have to sell
the balance tomorrow.
Nothing more done today.
New Actions (New Recommendations)
We need to short some insurance stocks.
Working Orders (Old Recommendations)
(
CHIR |
Quote |
Chart |
News |
PowerRating) — Sell all CHIR July 50 calls at $1.00 to close.
(
GM |
Quote |
Chart |
News |
PowerRating) — Sell the remaining GM January ’03 60 puts when GM breaks $56.00, or
when GM closes above $60.00.
(
JNJ |
Quote |
Chart |
News |
PowerRating) — Sell half of the January ’03 puts at $6.60, taking our money off
the table. Hold the balance.
(
MER |
Quote |
Chart |
News |
PowerRating) — Sell the July 37.5 puts at $3.00.
Rolls/Adjustments
(
DYN |
Quote |
Chart |
News |
PowerRating) — 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).
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%).
AOL — Long the October 20 buy-write at $16.30
(25%).
(
HAL |
Quote |
Chart |
News |
PowerRating) — Long the July 17.5 buy-write at
$14.25 (100%).
(
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
(
GM |
Quote |
Chart |
News |
PowerRating) — Long the January 60 puts at $3.30 (10%).
(
JNJ |
Quote |
Chart |
News |
PowerRating) — Long the January 60 puts at $3.30 (75%).
(
TGT |
Quote |
Chart |
News |
PowerRating) — Long the January ’03 35 puts at $2.00 (25%).
Short-term
Call Positions
(
CHIR |
Quote |
Chart |
News |
PowerRating) — Long the July 50 calls at $3.30 (50%).
Call Spread Positions
None.
Put Positions
(
BAC |
Quote |
Chart |
News |
PowerRating) — Long the August 65 puts at $1.25 (100%).
(
MER |
Quote |
Chart |
News |
PowerRating) (1) — Long the July 40 puts at $1.50 (25%). Sold at $3.00 6/12/02.
(
MER |
Quote |
Chart |
News |
PowerRating) (2) — Long the July 37.5 puts at $1.40 (25%).
Spread Positions
(
DJX |
Quote |
Chart |
News |
PowerRating) — Long the July 90/96 put spread at $2.00 (25%).
(
MER |
Quote |
Chart |
News |
PowerRating) — Long the June/July 40 put calendar at $.50 (50%).
(
MMM |
Quote |
Chart |
News |
PowerRating) — Long the October 110/120 put spread at $2.80 (50%).
Stops
GM – On a close above $60.00,
liquidate all remaining GM January ’03 60 puts.
- 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