Will It Fail Again?
The futures are firm at this hour, bolstered by
Personal Income (+.4% vs. +.1% expected) and Personal Spending (+.4% vs. +.2%
expected). The semiconductor sector has been hanging on by a thread, so it is
Novellus
(
NVLS |
Quote |
Chart |
News |
PowerRating) turn to act as cheerleader this morning, stating that the
“December quarter was the bottom,” raising estimates for Q1 2002, and
saying that it expects a return to profitability in the second quarter. This
should give the semis a pop (put buying opportunity?). it will be interesting to
see if it holds.
Overseas, stocks were mixed, with London’s FTSE
100 gaining 0.3% to 5114 and Germany’s Xetra DAX up 0.3% at 5052. Japan’s Nikkei
225 climbed 2.1% to 10,812, while Hong Kong’s Hang Seng fell 0.6% to close at
10,425.
The market starts the day in poor technical shape
after successive days of reversal. The
(
QQQ |
Quote |
Chart |
News |
PowerRating)s are within spitting distance
of their lows. Holders of QQQ puts should take profits there and look to reset
on rallies.
Volatility
Yesterday the VIX ended the day up .04 at 23.13,
the VXN was up .43 at 46.19, and the QQV was up .65 at 39.22. Volatility is STILL
way too cheap! If you want to play the markets, regardless of direction, long
options are the only way to go.
Trade Updates (yesterday)
(
AHC |
Quote |
Chart |
News |
PowerRating) — We bought the May 70 calls at
$3.50 (25%).
(
QQQ |
Quote |
Chart |
News |
PowerRating) — Once again we were able to snap up some QQQ
April 35 puts at $2.05. When the QQQs hit our first resistance level, we took
partial profits at $2.50 this afternoon. (We kept some also.) We will continue to
engage in this as long as the market lets us get away with it!
(
SLB |
Quote |
Chart |
News |
PowerRating) — Rallied and we were unable to buy the May 60/65 call spread at $1.30. Keep
it working.
(
XOM |
Quote |
Chart |
News |
PowerRating) — We bought the July 40 calls at $3.00 (25%).
Current Recommendations
We remain scale-up buyers of April puts in the
QQQ. After today’s hideous performance by the QQQs, we will be ready to step in
at the following levels:
- 34.26 — Market profile rotation level.
- 34.50 — Market profile rotation level.
- 34.97 — Market profile rotation level.
- 35.22 — 50% retracement level of the September to December rally.
- 35.64 — Gap from Feb. 15.
(
DIS |
Quote |
Chart |
News |
PowerRating) –See the Disney (DIS) “roll”
suggestion below.
(
SLB |
Quote |
Chart |
News |
PowerRating) — See the SLB “roll” suggestion
below.
(
SMH |
Quote |
Chart |
News |
PowerRating) — Take partial profits at recent lows (39.90
– 40.00).
Rolls/Adjustments
Disney (DIS) — Investors long the April 22.5/25
reverse collar (long the April 25 calls, short the April 22.5 puts) at a $1.15
credit (75%) may want to consider the following roll:Â Buy the Disney April
22.5 put/April 27.5 collar (buy the April 22.5 puts, sell the April 27.5 calls)
for zero. This will “roll” you into the DIS April 25/27.5 bull call
spread at a $1.15 credit.
Schlumberger (SLB) — Investors long the SLB May 55/60 call spread at $1.50 may
purchase the May 60/65 call spread at $1.30 to roll into the May 55/65 call
spread at a cost of $2.80.
Recap of open trades
Long-term
Reverse Collars
DIS — 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%).
Proxy buy-writes
None.
Complex Strategies
(
WMT |
Quote |
Chart |
News |
PowerRating) — Long the March 60 straddle at $3.30 (100%).
Short-term
Call Positions
(
AHC |
Quote |
Chart |
News |
PowerRating) — Long the May 70 calls at $3.70 (25%).
(
XOM |
Quote |
Chart |
News |
PowerRating) — Long the July 40 calls at $3.00 (25%).
Call Spread Positions:
(
DYN |
Quote |
Chart |
News |
PowerRating) — Long the March 30/40 1:2 call ratio spread @ $1.50.
(
SLB |
Quote |
Chart |
News |
PowerRating) — Long May 55/60 call spread at $1.50 (50%).
(
QCOM |
Quote |
Chart |
News |
PowerRating) — Long the April 40/50 call spread at $2.50 (100%).
(
TLAB |
Quote |
Chart |
News |
PowerRating) — Long the March 17.5/22.5 call spread at $.80 credit average (50%).
Note: This spread is a result of a reverse collar roll.
Put Positions
(
SMH |
Quote |
Chart |
News |
PowerRating) — Long the April 40 puts at $2.11 average cost (75%).
(
QQQ |
Quote |
Chart |
News |
PowerRating) — Long the April 35 puts at an average cost
of $1.90, taking partial profits at support, reloading on rallies.
Put Spread Positions
(
AZO |
Quote |
Chart |
News |
PowerRating) — Long the March 55/65 put spread @ 2.125 (100%).
Stops
None.
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Click
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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