Terrorism Jitters Return
Vice President Cheney spooked the markets by warning that it is
"almost certain" that the U.S. will once again be attacked by
terrorists. Reports of a new post-Tora Bora bin Laden videotape, and new suicide
bombings in Israel have also unsettled the market.
Currently, DJI futures are down 46 points, S&P futures are 3 points lower,
and the Nasdaq 100 futures are down 16.00. In Europe, the FTSE was down 0.1% to
5215, the DAX dropped 0.2% to 5025. In Asia, the Nikkei rose 0.1% to 11,857.
Hong Kong was closed for a holiday.
Volatility
Implied volatility took a big hit last week: A big rally, the end of earnings
week, and the beginning of summer-type markets all contributed to the decline in
implied volatilities. With the renewed terrorism fears it should show some
strength this morning, but ultimately it depends on market direction. The VIX
dropped 1.17 Friday to 20.28. On the week, the VIX lost 4.75 points and is now
back on its April lows! With the relative outperformance of the Nasdaq, the VXN
also took a beating, dropping 1.58 to 42.94. On the week, the VXN fell 7.79
points! The QQV fell 1.39 to 35.76, and lost 7.25 points on the week!
Volatility should cheapen this time of year, but
the VIX getting near 20 already makes me very wary…
Dollar
Keep an eye on the dollar, it is beginning to become an issue.
Currently it is up slightly against the Swiss franc and euro, down slightly
against the yen. Put it on your screen if you haven’t already done so.
Trade Updates (5/18/02)
(
TGT |
Quote |
Chart |
News |
PowerRating) — We were unable to purchase the remaining 25% of the TGT June 40
puts at $.40. Nothing else was done Friday. We will re-enter the TGT order this
morning.
New Actions (New Recommendations)
None.
Working Orders (Old Recommendations)
(
CHIR |
Quote |
Chart |
News |
PowerRating) — Sell all CHIR July 50 calls at $1.00 to close.
(
MSFT |
Quote |
Chart |
News |
PowerRating) — Buy the June/July 50 put calendar spread (buy the July 50 puts,
sell the June 50 puts) at $.50 (50%).
(
QQQ |
Quote |
Chart |
News |
PowerRating) — Traders long the QQQ July 33 puts take profits on a test of the
$30.98 – $31.87 gap area left Monday/Tuesday. (Make scale sales if the QQQ
travels into that zone.)
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 20 calls (to close) and sell the September 17.5 calls (to open) for
$1.25 credit (to you).
(
HAL |
Quote |
Chart |
News |
PowerRating) — Holders of the HAL July 20 buy-write, work to sell the HAL July
17.5/20 call spread at $1.00. This will "roll" the position into the
July 17.5 buy-write.
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|AOL] — 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 20 buy-write at $15.00
(50%).
HAL — Long the July 17.5 buy-write at $14.50
(50%).
(
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 (20%).
(
JNJ |
Quote |
Chart |
News |
PowerRating) — Long the January 60 puts at $3.30
(50%).
Short-term
Call Positions
(
APC |
Quote |
Chart |
News |
PowerRating) — Long the May 55 calls at $3.65 (100%). Expired worthless
5/17/02.
(
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%).
Expired worthless 5/17/02.
(
MLNM |
Quote |
Chart |
News |
PowerRating) — Long the May 25 calls at $2.40
(50%). Expired worthless 5/17/02.
Call Spread Positions
None.
Put Positions
(
BAC |
Quote |
Chart |
News |
PowerRating) — Long the August 65 puts at $1.50 (50%).
(
DJX |
Quote |
Chart |
News |
PowerRating) — Long the June 100 puts at $1.85
(50%).
(
QQQ |
Quote |
Chart |
News |
PowerRating) — Long the July 33 puts at $1.90
(25%).
(
SMH |
Quote |
Chart |
News |
PowerRating) — Long the June 40 puts at $1.75
(50%).
(
TGT |
Quote |
Chart |
News |
PowerRating) — Long the June 40 puts at $.85 (75%).
Spread Positions
(
MER |
Quote |
Chart |
News |
PowerRating) — Long the June/July 40 put calendar at $.50 (50%).
Stops
None.
|
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|
- 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