Slightly Better Open
Futures are firming this morning pointing to a
higher opening. The March payroll report was pretty much a wash as non-farm
payrolls gained a better-than-expected 58k, but the headline unemployment rate
came in at 5.7% vs. expectations of 5.6%. The big mover this morning is
Minnesota Mining and Manufacturing
(
MMM |
Quote |
Chart |
News |
PowerRating), which raised guidance after the
close yesterday and is trading up about $4.50 at the moment. That should give
the DJI a nice kick up the pants and look for the cyclicals to be firm.
A real good read on what is in store for the markets near-term will come from
the behavior of volatility today. It is Friday, after the unemployment numbers
have been released, and the market is looking higher. Ordinarily, volatility
should get horsewhipped today. If for some reason we find ourselves looking at a
market that is slightly higher, but with the volatility indices only down
slightly or even up, it will indicate that this rally will not hold. Be advised.
Volatility
The VIX hung in there yesterday closing up .13 at 21.77 after
approaching its 50-day moving average, but closed well off of its high. The VXN,
after making a new high for the move, reversed to close lower dropping .81 to
40.22, and the QQV also made new highs and reversed to close lower dropping .97
to 34.54. Volatility no doubt received some support from the economic numbers
due out tomorrow. As I mentioned above, volatility should get crushed today. If
it does not, it will be a red flag.
Trade Updates (4/04/02)
(
APC |
Quote |
Chart |
News |
PowerRating) — Our timing was less than elegant as APC got crushed along
with the rest of the energy sector, but we bought the remaining 50% of the May
60 calls at $1.25 this morning. This leaves us with a 100% position at an
average price of $1.50.
(
WMT |
Quote |
Chart |
News |
PowerRating) — We bought the June 60 puts at $3.00 (25%). We will be looking to
add at the $2.50 level.
(
ORCL |
Quote |
Chart |
News |
PowerRating) — We made no more purchases of the ORCL June 12.5 calls today.
Working Orders (Old Recommendations)
(
BAC |
Quote |
Chart |
News |
PowerRating) — Buy the August/May 65 put calendar spread (buy the August 65 puts
and sell the May 65 puts) for $1.50 or better (50%).
ORCL — Traders may begin making scale-down purchases of the June 12.5 calls,
looking to slowly build a long position at an average price of $1.25 or less.
New Actions (New Recommendations)
(
WMT |
Quote |
Chart |
News |
PowerRating)Â — Buy an additional 25% of the WMT June 60 puts on a at $2.50 as
WMT challenges its recent gap.
Rolls/Adjustments
Chiron
(
CHIR |
Quote |
Chart |
News |
PowerRating) — Investors long the July 50 calls at $3.30 (50%)
may sell the July 60 calls against their positions at $1.00. This will roll us
into the July 50/60 call spread at $2.30.
Disney
(
DIS |
Quote |
Chart |
News |
PowerRating) — The Disney roll we have been recommending has moved
away as the stock has declined. Investors long the April 22.5/25 reverse collar
at a $1.15 credit (75%) may hold if they are willing to take delivery of the
stock at $21.35 (22.50 short put strike – 1.15 credit). If not, look to
liquidate the position on the next bounce.
On The Horizon…
We are looking at short positions in the homebuilding sector and adding to longs
in the energy sector.
Recap of open trades
Long-term
Reverse Collars
(
DIS |
Quote |
Chart |
News |
PowerRating) — April 25/22.5 reverse collar (long the April 25 calls, short the
April 22.5 puts) at a $1.15 credit (75%).
Buy-writes
(
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%).
Proxy buy-writes
None.
Complex Strategies
None.
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%).
(
ORCL |
Quote |
Chart |
News |
PowerRating) — Long the June 12.5 calls at $1.30
(40%).
Call Spread Positions:
None.
Put Positions
(
AZO |
Quote |
Chart |
News |
PowerRating) — Long the April 60 puts at an
effective cost of $2.125 (50%).
(
BAC |
Quote |
Chart |
News |
PowerRating) — Long the August 65 puts at $3.00
(25%) — part of a spread “leg” to be completed later.
(
SMH |
Quote |
Chart |
News |
PowerRating) — Long the April 45 puts at an average
price of $1.76 (30%).
(
WMT |
Quote |
Chart |
News |
PowerRating) — Long the June 60 puts at $3.00
(25%).
Spread Positions
None.
Stops
None.
- 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