Options Trader: Thursday Wrapup

by: Philip Davis

Phil Davis submits: Hey my new positive mental attitude paid off! I don't know how, I don't know why but the markets rallied in the afternoon to post another positive day. I was on my way to a meeting, but I was positive they were going down as I heard that the National Economic Council said the economy slowed considerably in the third quarter and was likely to remain so.

I thought Fed Gov. Plosser's inflation warning would bother us, I thought oil back over $60 would give traders pause but nooooo! We have officially entered the Meatball Phase of the market because bad news JUST DOESN'T MATTER!

Although we had a lot of job cutbacks there didn't seem to be too many people looking for work so either everyone is working or they all got blog sites. So it's another day of going with the flow and enjoying the ride.

What do you think the odds are of my making a reference to Sergeant Schultz at 1:31 in comments and Cramer making the same reference on his TV show tonight? Hi Jim!

As we mentioned, the Dow made an amazing (cover of Newsweek worthy) recovery at 2pm and finished up for the day. The same was true for the S&P, and the NYSE, which, along with the Nasdaq, had a generally strong day.

The Nasdaq did it without the SOX, which were flat all day, and will be worse tomorrow after MU missed after hours The transports more than made up for it with a huge day and will face a test of 2,600 if we get some follow through tomorrow.

Oil made it back to $60.05, well below my bounce target of $60.29, and miles below our danger zone of $61.69. Isn't it funny that we now think of $61.69 as a high number when, just a month ago, T. Boone Pickens was telling us $100 was coming any day? Where is that old pumpaholic?

Gold took a relatively small bounce and finished at $573, not very impressive against a 1% rise in crude.

Just 2 weeks until Google Inc. (NASDAQ:GOOG) earnings. I'll try to do an update over the weekend! I was hoping to do better on the puts, but Cramer's been ga-ga for Google all week, so I guess we'll have to reposition on Monday.

Today's Picks:
I'm going to post an updated spreadsheet tomorrow, so I'm not going to spend too much time on details other than today's plays:

  • Eastman Kodak Co. (EK) Nov $22.50s took their time to get going but finished the day at $1.20 (up 20%)
  • Amazon.com Inc. (NASDAQ:AMZN) was all over the place but held my target and the Nov $35s finished at $1.60 (up 19%).
  • The Home Depot Inc. (NYSE:HD) never hit our mark and I'm not sure I want them now!
  • We correctly decided Walgreen Comp. (WAG) had bottomed at 1:32 and picked up those Nov $45s for just .80 but the $47.50s seemed pricey at .30.
  • Fannie Mae (FNM) looked wrong, but turned out just right at the end of the day, and the Nov $60s shot up to .75 (up 50%).
  • Molson Coors Brewing Co. (NYSE:TAP) fell so fast I missed it, but the Nov $70 puts finished at $5.80 (up 214%).
  • Alcoa Inc. (NYSE:AA) had a nice first day with the Nov $27.50s finishing at $1.20 (up 26%).
  • I was so pleased with my Genentech Inc. (Private:DNA) call! The $80 puts came off the table at $1.60 (up 14%) and we never looked back as the stock finished up 1.5% with the $85 calls at $2 (up 48%), but we need a .30T stop at this point as we are uncovered!
  • LG Phillips LCD Company Ltd. (NYSE:LPL) got my invitation to join the rally and the $17.50s gained a dime to .45.
  • Nokia Corp. (NYSE:NOK) gave us yet another .40 entry on the 20s, now .50. We exited our other 4 attempts at .70 so beware!
  • I got out of my personal disaster: General Motors Corp. (NYSE:GM) $32.50 puts for .95 and .80 (up 10%).
  • Toyota Motor Corp. (NYSE:TM) Jan $115s were taken off the table at $6.70 (up 168%) as it is no longer worth the risk as we already have the Jan $125s at $2.45 (up 123%) with a .30T stop.
  • We reestablished oil puts in comments -- very high risk, but many are still in the ballpark for tomorrow (much to our disappointment). We are out of these if oil breaks $60.21:
  • I also set the following markers to watch: ExxonMobil Corp. (NYSE:XOM) $67, Valero Energy Corp. (NYSE:VLO) $50.25 (holds $50 well), Oil Service HOLDRs ETF (NYSEARCA:OIH) $124.25, Suncor Energy Inc. (NYSE:SU) $68.50, Chevron Corp. (NYSE:CVX) $63.75, Chesapeake Energy Corp. (NYSE:CHK) $29, United States Oil Fund ETF (NYSEARCA:USO) $54.75 -- with 3 going against you acting as warning to get out.
  • Valero Energy Corp. (VLO) $47.50 puts for .40 -- now .55
  • ExxonMobil Corp. (XOM) $65 puts for .40 -- still .40. Also the $67.50 puts for $1.15 -- now $1.25. Also, the spread of the Nov $70s for $1 1:2 with the Nov $65 puts for $1.10.
  • Peabody Energy Corp. (BTU) Nov $35 puts for $1.35 -- now $1.45

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