Options Trader: Monday Wrapup

by: Philip Davis

Well that was a nice week's rest wasn't it? Mr. Jones reasserts himself, wiping out 6 sessions of losses in one fell swoop but stopping just over the 12,100 line in a very impressive outing.

Who would have thought that could happen? Oh yes.... me!

Those Diamonds Trust Series 1 ETF (NYSEARCA:DIA) Mar $121s are already $4 (up 20%) and, of course, there was no reason to take the puts on today's action.

Of course, had I really known it would take off this quickly, I would have gone for the current $121s, which doubled today from .45 to .90 but I was still concerned about pre-election jitters (but I guess I'm the only one).

It seems the virtual assurance of a Democratic House with the Republicans maintaining control of the Senate is just the kind of hopeless two years of gridlock that investors have been hoping for.

We all know I am no fan of a commodity rally but today's round of merger mania left investors feeling everything is undervalued.

OSI Restaurant Partners Inc. (OSI) is being taken private for a 23% premium, NVIDIA Corp. (NASDAQ:NVDA) is buying our old friend PortalPlayer Inc. (NASDAQ:PLAY) (good move), Harrah's Entertainment Inc. (HET) is buying London Clubs International (old news), McKesson Corp. (NYSE:MCK) is buying Per-Se Technologies Inc. (NASDAQ:PSTI) for a 15% premium, Abbott Laboratories (NYSE:ABT) is buying KOS Pharmaceuticals Inc. (KOSP) for a 50% premium (nuts), and Four Seasons Hotel Inc. (FS) is being bought by Bill Gates and Saudi Prince Alwaleed for a 28% premium.

That's a $14B day!

The S&P blew through my 1,370 bullish target and didn't look back until it beat 1,380 where it decided to take a quick break.

The NYSE tore through 8,800 by 1pm and never looked back, while the Nasdaq took a mild rejection off my 2,375 target in the final minutes, but didn't look worrisome.

The SOX were the real star of the day with a 2% gain right through the 50 DMA finishing near the day's high at 457 and the transports gapped over the 200 dma and closed at a whopping 2,609.

Gold was well behaved, hanging out at $627 but still not impressing the miner stocks, while oil moved up .88 to $60.02 and that sector acted as if $100 oil was right around the corner.

Perhaps it is, as I see nothing else that explains the number of record highs being recorded in the oil patch. Other than Valero Energy Corp. (NYSE:VLO), the bulk of the regulars we watch have moved 35 to 50% above the trend for oil in the past 3 months.

I'm not going to worry about it -- we've had a lot of great picks lately in the non-energy arena and I seem to have gotten a handle on the earnings reports so we have a few fun weeks ahead of us!


  • American Electric Power Co. Inc. (NYSE:AEP) was a no-trade under the Valero Rule.
  • Barrick Gold Corp. (NYSE:ABX) was a no-trade due to lethargy in the gold patch (and gold did not break $630).
  • I couldn't resist the BP PLC (NYSE:BP) $65 puts for .15
  • Berry Petroleum Co. (BRY) went up 1.3% and gave us a .45 entry on the $30 puts ahead of earnings.
  • ConAgra Foods Inc. (NYSE:CAG) made a nice play with a .20 pick up on the Dec $25 puts which finished at .30 (up 50%) despite the great surroundings.
  • Caterpillar Inc. (NYSE:CAT) Jan '09 $60s came in at $11.50 and now we wait...
  • In comments Arnie suggested the Eli Lilly & Co. (NYSE:LLY) Jan $60s for .45 and I agreed with that one.
  • Murphy Oil Corp. (NYSE:MUR) Dec $50 puts were added for $3.30.
  • Arnie also came up with Netease.com Inc. (NASDAQ:NTES), so he's on a roll today! And the Mar $17.50s we decided on for $1.10 should do very well after their spectacular earnings report this evening!
  • We cashed out Sirius Satellite Radio Inc. (NASDAQ:SIRI) at $4.02 (up .30) and traded for the Dec $4s for .25 to protect the principal from Wednesday's earnings (just in case).

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