Options Trader: Wednesday Wrapup

by: Philip Davis

That was not so bad!

With oil off 2% across the board the oil sector cost the S&P .3% of the .45% it lost for the day. Couple that with a lackluster showing from the miners (down 1.5%), builders (-3%) and the brokers (-1.5%) and it's amazing it held 1,290. We are 2% off a 4 year high on the S&P...

The Dow may have ended up just shy of 11,300 but the NYSE held 8,300 and the Nasdaq took a nice bounce off 2,125 to get back to 2,135.

This came on a day when when major sectors crashed, NSM gave a horrendous report and Iran claimed they would have a "nuclear breakthrough" (and we don't think they are giving the world cold fusion). If I gave you this background and asked for an estimate what would you have said we'd be down on the Dow? 100pt? 200?

So I remain cautiously enthusiastic. The S&P wisely kept us out of buying any calls today but we will keep them on the burner for tomorrow.

Housing was just the disaster we predicted this morning, thank goodness we bailed ahead of the report. Our call on KBH $40 puts was right on the money with a .70 open and a $1.50 close (up 115%), not bad for a day's work!

Oil dropped $1.34 to finish at $71.76, very bad when you consider we have rolled into the October contracts! We killed our oil puts today as they made too much money to continue to risk them overnight. I was disgusted by the pumping activity at around 1:30 and just didn't trust the AH action.

Gold finished just above my target at $633 as the terror premium leeched out of the metals market as well. The dollar lost roughly .3% today.

At this point we are stretching my comfort level with the "consolidation" just a tad which is how we ended up mainly in cash today. Still, even if we quit now it has been a pretty successful week - but where's the fun in that?


MSFT had a great start but pulled back a lot, we didn't play but I still like the Oct $27.50s, possibly for .15 tomorrow.

SUNW $5s held steady at .10 even though the stock went up 4%.

HPQ and SHLD held up well today.

We made several nice intraday put calls:

* XOM $70 puts went from $1.10 to $1.50 (up 40%) when we called it off.
* CVX $65 puts were repicked at .70 and finished at .95 (up 35%), up 70% from Tuesday's entry.
* VLO was a nice call on the $62.50 puts for $1.75 which we exited at $2.20 (up 30%).

SU was very slow to drop and the $80s finished at $2.85, up 80% from where we repicked it at 11:15 for $1.60 so don't cry to me if you missed it!

CHK $30 puts dropped a nickel to .30 and I doubled up ahead of tomorrows gas inventory. This is now our only open oil put being played with a small percentage of profits.

WY $60s opened up another 2% today and gave us a great exit at $2.60 (up 190%).

PKX Nov $65s still look good at $2.90 (up 15%) but I will kill the leaps too if we break technicals tomorrow.

RSTO gave us another entry at $6.15 and quickly recovered to $6.23 but I'm off any calls at the moment.

We said goodbye to BTU $52.50s at .70 (down 20%) it was great as a buffer against the wild oil swings!

ABX $32.50s were dumped this morning at $1.90 (up 100%).

NEM $50 puts are .50 (down 25%) but the ABX profits let us hold on another day.