Options Trader: Monday Wrapup

by: Philip Davis

Morose: "A glum, hopeless shrug; to sit in a moody silence"

Just what you'd expect the day before possible Armageddon. This was the lowest volume non-holiday in about 2 years so there is little to be divined by examining today's trading activity.

The Dow held up nicely at 11,345 and the S&P closed right at the mid-point at 1,297 (which is a huge number!), the NYSE barely budged to 8,361 and the Nasdaq overcame a 2% SOX pullback to close at a strong 2,147.

I always find it's best to throw out the two days before a pullback and compare where you are now to 3 sessions ago and then decide if you are going to worry or not. We are flat to up on all indicators using this model and that is what the weekly charts will reflect as long as we don't make another leg down between now and Wednesday.

This is the opposite of the case of the oil charts where 3 days ago we were at $74.50 at the open and today we closed at $72.55, still an alarming drop!

Gold made a spectacular recovery as many people around the world are taking this Jihad thing very seriously (you would too if you were within marching distance) and are stocking up. This has given gold a strong technical bounce off the 50 dma at $620 but another failure at $640 may be more than traders can take.

All in all it was a great day to sit on the sidelines and not really care!


We made some nice day trades today:

The CVX $65 puts came in at .55 and I couldn't resist this counter play.

We picked up MO $90s for .20 as a gamble and lost a nickel already.

CHK $30 puts for .35 were also too hard to resist, those made a nickel.

We were in the TSO $70 puts for .90 and out at $1.10 (25%) which made a nice risk offset to holding the other two small oil puts.

DD made another anti oil play and the Oct $42.50s came back to .40.

FCX had a great day with a $2.20 open and banged into the 5% rule with the $55s closing at $3.80 (up 75%) but I got half out at $3 (I tend to be very cautious early in an option period until I get ahead).

RTSO came close enough to my target that I picked up some at $6.20.

PKX came down nicely today but the November $65s went up a dime to $2.60 so I'm waiting on that one.

We made a timely pick-up of the ABX $32.50s for .95 at lunch as an additional hedge into our very speculative oil puts. They closed at $1.40 (up 45%) but really took off in the AH.

XOM $67.50 puts looked tempting at .50 but we were too loaded up with oil on that side.

I decided I liked the Google $400s at $3 in hopes they follow CME to the upside with those $500s at "just" $2.05.

We had to reup on HD $35s for .50 although no hurricanes is bad for them. They make a good proxy for an upbeat housing report.

BTU is one of the only plays still open from last week and makes a nice offset to oil puts with the $52.50s still at .90 (up 20%). If there is a serious supply disruption, I think North American coal will fly!

Well, good luck to the planet tomorrow. I just can't believe it will come to holy war but we'll certainly be making some defense plays if it does!