Options Trader: Thursday Wrapup

by: Philip Davis

Hey that was fun! Mr. Jones gave us a little scare in the morning with another test of the 12,100 mark, but that was quickly established as the low of the day as we moved on to yet another record close in a big volume day. That's 4 straight days of higher lows, higher highs, higher opens and higher closes!

The S&P and the NYSE did even better than the Dow, with the S&P testing 1,390 near the close and the NYSE coming to a rest well over 8,800.

The Nasdaq had the scariest drop of the day followed by the greatest recovery, as it spent all of 40 minutes around 2,350 before tacking on a 25-point gain to finish the day at 2,377.

The SOX were a big help, showing strength all day while the transports put in an iffy but solid performance on GDP fears.

Oil gave up half of Wednesday's gains, falling back to $60.36 after making a day high just 1 penny above my $61.69 target. The Valero Rule kept us from taking any oil calls, especially watching Cheniere Energy Inc.'s (NYSEMKT:LNG) awful open (and awful day in general).

As you can see from a group chart, we got some mixed signals from the group, but never from LNG, which lost 3% for the day. This is why we always have guest stars in our group; certain stocks tap into key sentiments at any given time!

December gold broke $601 during the day, but decided it didn't like it there and closed at $599.80. Now it is tightly squeezed between a declining 50 DMA and a rising 200 DMA, so we will look for a breakout in either direction, most likely tomorrow!

All this commodity action came as the dollar gave up half a point. All the other CB's are on inflation-watch and raising rates, and while we may swallow this rubbish at home, the world markets do not consider $60 oil to be a sign of inflation being "contained."


We had a very nice run on the day's picks, but a monkey with a dartboard can make money on calls in this market, so I'm not particularly proud of myself...

  • Amgen Inc. (NASDAQ:AMGN) gave us a nice open with the second round of $75s coming in at $1.50 and finishing the day at $2 (up 33%).
  • Applied Materials Inc. (NASDAQ:AMAT) was doubled yesterday and that 20% position is all I want until we see which way the economy is really going. The average entry on the $17 puts is .38 and currently down a dime.
  • America Movil SA de CV (NYSE:AMX) took off in the afternoon and the $45s finished at $1.35 (up 35%).
  • The CAT came back (Caterpillar Inc. (NYSE:CAT)) with a nice jump that did not move the Dec $60s far off the $3.50 mark (up .20) and we'll see if this was a bright move ahead of the GDP. Remember my logic here was they already called for a "catastrophe" so a disaster should be a relief!
  • eBay Inc. (NASDAQ:EBAY) had a very nice day, flying over the $32 mark it had tested all week and the Dec $32.50s finished at $1.80 (up 20%).
  • Goodyear Tire & Rubber Co. (NYSE:GT) Jan $15s hit $1.30 (up 15%) and hopefully oil will drop a little further.
  • MGM Mirage (NYSE:MGM) gave us a great entry on the morning drop at just .65 and the $45s finished back at .80 (up 22%).
  • RealNetworks Inc. (NASDAQ:RNWK) gave us a .30 entry yesterday on the Dec $12.50s and has remained there despite some good gains.
  • Sirius Satellite Radio Inc. (NASDAQ:SIRI) took off at 2pm for reasons unknown, although it was day one of Howard Stern's global broadcast and the articles are turning positive as analysts are finally starting to get the fact that opening the show to a global audience at $12.95 a month might not be the worst idea! The stock finished the day at $3.84, up 3% from our entry.

In comments today someone asked me if I was worried about SIRI, as it was going down in the morning and at 10:55 I said:

"There is a massive campaign going on to take down Sirius. Constant reporting of how they overpaid for Stern (they paid him in stock -- hard to overpay) and acting like satellite radio is some passing fad.

"This is a very long-term play for very patient people. If you would have invested in cable companies in the 70s you would have gone through the same thing but look at Time Warner now.

"The difference is there were 100 cable companies and there are only 2 satellite radio companies and, more importantly, there is only so much content and SIRI has locked up their fair share.

"This is absolutely not the kind of thing you want to stare at!"

That reminded me of an important investing lesson I learned from a cartoon a long time ago that I never forgot, and if you don't have the patience to watch it, then this philosophy is unlikely to work for you, but I highly recommend giving it a chance.

It's a beautiful piece called "The Man Who Planted Trees."

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