Options Trader: Monday Wrapup

by: Philip Davis

Oh that was so close! The Dow got all the way to 11,960.51, just 9.49 away from 12,000. Tomorrow will be a real test as we got horrendous earnings this evening from Stanley Furniture Co. Inc. (NASDAQ:STLY), Pharmaceutical Product Development Inc. (NASDAQ:PPDI), Werner Enterprises Inc. (NASDAQ:WERN) and Universal Forest Products Inc. (NASDAQ:UFPI), but all of that will be meaningless as big guns Merrill Lynch & Co. Inc. (MER), Johnson & Johnson (NYSE:JNJ), United Technologies Corp. (NYSE:UTX) and Wells Fargo & Co. (NYSE:WFC) all report tomorrow morning. After the bell we will get International Business Machines Corp. (NYSE:IBM), Intel Corp. (NASDAQ:INTC), Motorola Inc. (MOT) and Yahoo! Inc. (NASDAQ:YHOO).

The S&P stayed over our target all day and climbed up to 1,369, looking strong at the finish. The NYSE had a much stronger day, running up 46 points to 8,692, while the Nasdaq drifted along just under 2,365 despite a 1% gain on the SOX.

The transports gained 1.3%, powering up to 2,640 despite a 2% rise in oil -- either they do not believe in $60 oil or the economy is just so great that "It Just Doesn't Matter!"

A rise in oil to $59.94 mattered to the oil sector that tacked on about 3% on average, doubling the Thursday and Friday gains.

Gold picked up $6 as there was talk of the BOJ dumping dollars, but I think gold got a little ahead of itself as the dollar held pretty firm, giving up just .18 to settle at 86.98.

We got our good reports from Eaton Corp. (NYSE:ETN) and WW Grainger Inc. (NYSE:GWW), so the day was never really in doubt, and the early sell-off gave us a nice entry on our plays today.

Commerce Bancorp Inc. (CBH) was in-line, while Wachovia Corp. (NASDAQ:WB) was a big disappointment and was treated as such. Their earnings took the wind out of the banking sector, which was a real lagger today. Mattel Inc. (NASDAQ:MAT) had great earnings, and, had I known they had that Elmo doll, I thought it was pretty obvious after the fact...

Today's Picks:

  • The rest of the October oil puts stopped out early and I got a nice little bonus off the cover rolls we played on Friday as both ExxonMobil Corp. (NYSE:XOM) and Valero Energy Corp. (NYSE:VLO) jumped to unbelievable levels. So unbelievable, in fact, that I couldn't bear to hold them anymore and took them both off the table around .50 (up 150%).
  • That leaves me with just the XOM Nov $70 calls covering my put, positions and a very queasy feeling after today's action!
  • Research In Motion Ltd. (RIMM) got punished 3% today and looked weak going into the close.
  • UnitedHealth Group Inc. (NYSE:UNH) tried to shake off the bad news and had a very volatile day, ultimately dropping 2.5%.
  • Allstate Corp. (NYSE:ALL) had a nice first day with the Nov $62.50s running up to $1.95 (up .10).
  • American International Group Inc. (NYSE:AIG) went nowhere but the Nov $70s gained a nickel to .40.
  • Altera Corp. (NASDAQ:ALTR) $20s came in at .50 and stayed there!
  • Lowe's Companies Inc. (NYSE:LOW) Nov $32.50s look dangerous but they came in for .40 so let's hope for the best!
  • Intel Corp. (INTC) never triggered, as we don't overpay for risky entries -- maybe tomorrow...
  • General Electric Co. (NYSE:GE) held $35.50 quite nicely, but I am hoping for a pullback closer to $34.
  • WorldWater & Power Corp. (WWAT) shot up 10% today, so whoever did that fess up -- that's no way to buy a penny stock!
  • Merck & Co. Inc. (NYSE:MRK) had a great day, and the Nov $45s cost an extra dime to play but finished at .85 (up a dime).
  • Gap Inc. (NYSE:GPS) fell too fast to play.
  • We got out of our all Google Inc. (NASDAQ:GOOG) calls yesterday as I chickened out in the morning slide and took profits off the table. For myself that was just the Dec $420s at $29 (up 150%) and the Dec $400s for $40.90 (up 91%), plenty to cover even a total $24 loss on the remaining puts..
  • I should have gotten half out of Nokia Corp. (NYSE:NOK) at .70 (up 75%) but I was greedy and held out for .75 -- hopefully I don't regret it!
  • Oil Service HOLDRs ETF (NYSEARCA:OIH) $125 puts got crushed at the open and we were lucky to get out with $1 (up 122%). All October oil prices reflect adjustments from cover credits.
  • Public Service Enterprise Group Inc. (NYSE:PEG) $60 puts are still there at .25 (up a nickel) as they dropped too fast to sell well.
  • Sunoco Inc. (NYSE:SUN) $65 puts stopped out at .90 (up 29%)
  • VLO $50 puts came off at .15 (even).
  • XOM $67.50 puts finished at .25 (up a nickel).

On the whole, I should have left well enough alone on Friday and taken these all off the table, it was silly to leave the October oil puts open as any little thing (like oil going up another $1.50) could wipe them out this close to expiration.

Read all of Phil Davis's articles on Seeking Alpha.