Slightly Lower Open, But Watch the Dollar!
Stocks are expected to open slightly lower this
morning on follow-through selling from Friday and lower overseas markets. SSB
PowerRating) and Veritas
The big news on the corporate front is the Pfizer
PowerRating) acquisition ofÂ
PowerRating) for $60B in stock. There has been little reaction so far
apart from arbs shorting PFE and buying PHA.
The real news, as far as I am concerned, is the continued decimation of our
currency. Today the euro has gone to parity with the dollar, and the yen is also
sharply higher against the dollar. This year the dollar has lost 15% of its
value against the euro alone, and when the losses in the market are added to
this figure, the totalÂ losses suffered by foreign investors this year is
staggering. This could lead to additional foreign selling of U.S. assets.
Implied volatility was lower Friday, but not much. The VIX lost .31 to 38.33
after once again crossing above 40.00. The VXN lost 2.98 to 66.00 and the QQV
dropped 2.95 to 56.56. The Nasdaq-related indices sold off much more because of
the relative strength of the Nasdaq vs. the DJI and the S&P.
Implied volatility is now back to September 2001 levels, and the outright
purchasing of options forÂ either bullish or bearish positions should be
avoided! If you want to play the upside here, I would suggest ratio call spreads
(buy 1, sell 2, etc.) for little or no cost.
Trade Updates (7/12/02)
New Actions (New Recommendations)
Working Orders (Old Recommendations)
PowerRating) — For those long the SEBL August 27.5 buy-write: Buy the
SEBL August 27.5 calls (to close) and sell the November 20 calls (to open) for
$2.00 credit. (Far away right now.)
Recap of open trades:
Call Spread Positions
- 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
- 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