Options Trader: Tuesday Wrapup

by: Philip Davis

What ever happened to projections? It used to be that by the 6pm news, we pretty much knew who won and lost the election. This year it's over 80% "too early to call." Both sides are claiming victory and everyone is talking about the election but there are no facts...

Oh well, it was a nice relaxing day today, our calls did well and our puts improved -- who could ask for anything more?

The Dow fell short of a record as it bounced back off the 12,200 mark but still finished at 12,156, just 11 points shy of a closing high, fully erasing 6 sessions of losses.

The S&P held the 1,380 line while the NYSE tested a new high before closing up just a touch at 8,835. The Nasdaq broke the 2,375 mark and closed just .88 above it, just 3 points below the May high.

The SOX did their part with a very strong 2% gain after testing the 200 DMA at 4726. The transports were a little indecisive but made a nice day of it at 2,618 but tomorrow will be critical.

DJIA Chart 8 11 06 SOX Chart 8 11 06

Oil dropped $1.09 to finish at $58.93 but the untold story was the $1.40 drop on contracts from Jun '08 on.

That drop in oil came against a falling dollar as our indecision is the world's lack of confidence in our currency. It's no emergency yet as gold finished flat at $625, but looks weak to me.

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We watched and waited today and nothing happened.

In comments I decided that, if I were trading oil, I would have gone long into the close as I think there are plenty of ways to spin Prop 87 as something that will increase crude prices in the short term no matter which way it ends up.

That did not stop me from adding the Suncor Energy Inc. (NYSE:SU) Dec $75 puts for $1.90 and holding them at the close for $2.20 in hopes of a retest of oil's low for the year. SU is still $3 above last month's option expiration and is $13 over last November's high. The EPS estimate for Q4 is $1 vs. $1.26 in Q4 '05 -- seems like a short to me...

We took advantage of RealNetworks Inc.'s (NASDAQ:RNWK) big run to sell the $12.50s for .20 against the Dec $12.50s, now .35 (up a nickel). This lowers our basis to a very comfortable dime.

The NASDAQ 100 Trust Shares ETF (QQQQ) $42s pulled back too far for comfort and we took them off the table at $1.05 (up 75%).

Anadarko Petroleum Corp. (NYSE:APC) also dropped off on us and we were lucky to get out with a dime on the $50s at .50.

American Express Company (NYSE:AXP) had a great day and raised their targets so we should be having fun tomorrow with the $57.50s at $1.30 (up 53%) and the $60s at .10 (down 70%).

Quest Software Inc. (NASDAQ:QSFT) $15s stopped out at .90 (up 500%) but I held the Apr $15s at $2.15 (up 40%) with a $2 stop.

Good luck to you and whoever you vote for -- they're sure going to need it in the next couple of years!

Read all of Phil Davis's articles on Seeking Alpha