Options Trader: Tuesday Wrapup

by: Philip Davis

Wheeeee! Isn't this fun?

And AMAT is coming through in the AH with huge numbers to keep it going tomorrow! Don't say there wasn't anything you could buy as this one just sat there all day (showing how nervous people still are of making bets).

We got lots of good numbers including a crushing 425 on the SOX! Dow 11,230, S&P 1,285, NYSE 8,296 and even the Nadaq looked good at 2,115! We got a nice consolidation pattern with a solid finish across the board and I think it will take a really bad CPI number to bring us down tomorrow.

I regret not being around as there were some great opportunities to short oil but we will likely get those in the morning ahead of inventory. This run-up is because commodities are going down, so I don't know why the sector was having a party.

Oil was trending straight down all day but literally jumped up .30 between 2 and 2:35 then fell right back to finish the day at $73.05. Whoever is goosing the price doesn't have charting skills since the additional failure to break $73.50 actually sent a very bad signal to oil bulls.

I'm dreading the shenanigans around tomorrow's oil numbers as somehow "analysts" are calling for a very mild drawdown in crude despite the fact that BP failed to deliver 2.8M barrels last week. I can't even pretend to see where that could come from, you can't divert tankers that fast and if there is anything other than a 2M-3M barrel draw, then these numbers have been fudged beyond repair (as we already proved this weekend).

As we said Monday night, inflation data trumped dollar movement today as the dollar sold off on a big 50 dma rejection (imagine what gold would have done if it hadn't) but the PPI kept gold in check. Gold closed at $625 after taking its own bounce off the 50 dma of $620.

All in all, a very good day for the bulls...


I'm never that proud of my picks on a day like today when a monkey with a dartboard could have done as well so I'm not going to waste too much space on review. We had a very prescient call to pull back on oil and I'm hoping for a generous reentry tomorrow. We'll talk about that in the morning.

Some of the calls worth discussing include:

HD performed like a champ, even though there was a big attempt to shake out the day traders at 9:45, the quick recovery indicates the true strength of this stock (and we haven't even had a hurricane yet!). The Sept $35s are still "just" .75 (up 50%).

HPQ was on the money with a nice build-up (wasn't I smart not to short Dell?) and the Sept $35s ran up to .90 (up 30%) while the Jan $37.50s barely budged to $1.50 (up .10).

SPLS went nowhere but we bought this for next quarter, not now.

I am very glad to be back in GE with the Sept $35s still at .15 (up .05) and the $32.50s already paying for that gamble at $1.15 (up 35%).

EBAY flushed the weak hands (this is why longer calls are much more relaxing sometimes) but recovered instantly and the Oct $25s are almost in the money at $1.90 (up 25%).

GMCR is sneaking up on us! I wish they had options as the stock is already at $39.41 (up 10%) from last week's bottom call. Who says I never pick straight stocks?

INTC came down nicely in the early dip and the $17.50s hit $1 (up 15%) which is great for one day on this slow mover.

PD is one I wish I traded today. I closed mine yesterday as it was up too far but there was a huge opportunity this afternoon to rebuy as the stock zoomed up on a rumor that N had accepted an offer from Teck and let PD off the hook - no such luck and the stock dropped $2 in the last hour of trading, still up for the day though.

Great article on OLED, which had a wild day.

STX also had a wild day but the Mar $22.50s stayed safely up and finished at $2.05 (up 40%).

XLNX announced after the bell that there was no options fraud found!!! The Sept $20s are already at $1.40 (up 15%) but you aint seen nothin' yet! Remember we were only looking for $22 on this one so watch out if they get stuck there.