The Main Thing To Be Aware Of This Week…

The market looks set to open higher this morning
as most of the world seems to be enjoying a New Year’s rally (except  Japan —
closed). Currently, DJI futures are 49.0 higher on the bid, S&P futures are 9.20
higher on the offer, and Nasdaq 100 futures are 3.50 higher on the bid. In
Europe, the FTSE 100 is up 6.00 or .15%, the DAX is 88.94 points or 3.07%
higher, and the CAC40 is 43.63 points or 1.42% higher. In Asia, the Nikkei is
closed, but the Hang Seng rose 44.23 points or .47%. Interest rate futures are
broadly lower, the dollar is modestly higher against the majors, crude futures
(Feb.) are about $.50 better, but gold futures (also Feb.) are sharply lower,
off about $4.00.

Initial jobless claims for the week ending 12/28 were just released, coming in
worse-than-expected at 403k versus an expected 382k, but this did not seem to
impact the market. A bigger number at 09:00 CST will be the December
manufacturing ISM, expected at 50.1. This will be a market mover. Also, December
auto and truck sales will be released at some point this morning.

The main thing to be aware of this week and next is that the propaganda machine
will go into overdrive, exhorting investors to “put their money to work,” “we
can’t possibly go down four years in a row,” etc., etc. I would counsel caution.
If someone put a gun to my head and forced me to make a market call for 2003, I
would say unchanged, with volatility going much lower. That doesn’t mean we
won’t have periods of extreme rock-n-roll like June/July, September,
October/November/December of this year, just that I think we will do a little
more drifting and chopping, with volumes and volatility dropping off as we
continue to digest the bubble-burst that just took place.

Update: (12/31/02)

KSS — Sold the remaining January 50/60 put spreads at $3.70, closing
the position.

QQQ — Bought the January 23/26 call spreads

New Recommendations


Working Orders (Old Recommendations)


Recap of open trades


Reverse Collars




Proxy buy-writes

DYN — Long the January 15 calls at $3.20 — left over from proxy buy-write
(50%). Left for dead.

Complex Strategies

BGEN — Long the January 40/45 box (25%).

Directional Positions



Call Positions

HD — Long the January 25 calls at $1.45 (75%).

Call Spread Positions


Put Positions


Put Spread Positions

BAC — Long the January 60/70 put spread at $2.90 (25%).

KSS — Long the January 50/60 put spread at $2.475 (25%). Sold half at
$5.00, 12/23/02., sold remainder at $3.70 on 12/31/02.

PG — Long the April 75/85 put spread at $2.50 (25%).


BAC — Use a $71.50 close only
(meaning it has to close above $71.50) stop on the entire position.

HD — We are using a $23.00 close only (meaning it has to close below $23.00)
stop on the entire position.

  • 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