Options Trader: Monday Wrapup

by: Philip Davis

Another light volume day but you certainly can’t argue with the results.

Last Wednesday we were looking at transports and I said at the time: “Transports need to retake 2,400 with some authority and have no excuse not to if oil goes below $72. The SOX will turn consolidation into decline if they can't get back over 440 very soon.” Today we got a test of both -- Transports and SOX.

Both the S&P and the Russel gave us good reason to buy today but I got a little nervous in the afternoon and started moving back to mainly cash (see comments) as the S&P had a lot of trouble at 1,303.

Hopefully we can break out with some follow-through tomorrow. All our indices were comfortably up today so we will be looking for some upside tests in the morning but I'm not happy as a low-volume move up will not help the bulls case at all.

Oil was the story of the day as crude fell all the way down to $70 before recovering to finish down $1.90 at $70.61 but volume was way up, mostly on the downside.

We got one of the best Valero signals ever with every component but XOM giving us an all-clear all day to sell.

Gold followed suit with a $7 drop to $623 against a flat dollar but a Peruvian mine looks like they are going to go on strike to pump up the price of gold (oops, I mean to get better working conditions… yeah, that’s the ticket!). The mine is owned by NEM and produces 9,000 ounces of gold a day yet their stock jumped up on the late news.

This is the same Newmont Mining that is protesting the “silly” Indonesian charges that they are poisoning the water in Buyat Bay.

On the whole, it was a great way to start the week!


IWM got off to a great start with the Oct $72s moving up to $1.65 (up 20%).

Maybe Barrons was right about HBs but I shorted TOL as it shot up, picking up the $25 puts for .35 as it just seemed a little cheap.

INTC was a shining star with a 2.5% gain and the Oct $20s already at .60 (up 33%) and the Jan $17.50s at $2.70 (up 70%).

TIF added 3.5% and looked great with the Jan $35s running to $1.40 (up 40%). I will have to half out ahead of earnings if this keeps up even though I am a true believer.

XOM worked out quite nicely with the $70 puts jumping to $1.10 (up 60%) and the $67.50 puts up a nickel at .35. Check out the XOM hourly chart from Thur 8/10 - Mon 8/14 and compare it to Thur 8/24 - today! I bet Tom can do a nice comparison but if that trend continues we may have another $2 downside (and a good entry in the morning!).

ECA went nowhere but the CHK $32.50 puts hit $1.20 (up 60%).

HD faded from a nice start and the $35s are now .25 (down 50%).

DD $40s moved up a nickel to .45.

LUV $17.50s hit .40 (up 60%).

CAL $22.50s finished at $2.10 (up 30%).

STX Mar $22.50s flew up to $1.95 (up 30%).

SUN opened too low to play (down 2% for the day).

I’m very proud of Friday’s pick, DWSN as one of the only oil stocks to go up but it is really time to get out of these! FTK gave you all day to get out.

MDR $50 puts finished at $2.90 (up 80%).

NEM $50 puts came back to .75 (up 25% from original, up 75% from repick).

SLB $62.50 puts are back to $1.60 (up 50%), this was last week’s peak!

Oops, we forgot to buy TM at $106! $110s are $1.10 but only if we break up tomorrow.

WSM popped up a dime already with the $30s now going for .35.


Art Laffer is having the best argument on CNBC, the gist of which is that we are the World's banker and that's why the dollar is in demand. It is very compelling BS!

The other guy, Peter Schiff is telling us we need to suck it up and embrace the coming recession.

If anyone knows where you can get a transcript of this, please let me know...