Options Trader: Wednesday Wrapup

by: Philip Davis

Another day another record high.

There's a terrible moment, when you try to launch into orbit, when all the engines need to fire in sync -- otherwise the rocket can spin out of control.

We fired on all cylinders today! The NYSE was the last index to go positive at 10:40, and our whole group pulled back less than 50% off the 2pm peak finishing at new highs.

Market Summary Chart 16 11 06

In addition to a stellar performance from all our indices, we have the transports gapping up over 2,650 resistance and finishing at the HOD, while the SOX tested 480 and 490 and decided 484 was a good place to finish (up .4%).

TRANQ Chart 16 11 06

Oil was up a dollar and retraced half of it at the close to finish at $58.76, still within our comfort zone but, as usual, the oil stocks went crazy on the lack of falling.

You have to ignore the dollar amount on this chart as it's based on a continuous contract price, but the moving average is fulfilling my prediction of last week: "Oil could go either way today but showed real weakness at the $60 level of late as the rapidly falling 50 DMA races down towards it. My downside target remains $57.14 but first we have to get a close back below $58.56 first."

Today's inventory report showed a build in crude of 1.3Mb, but a draw in gasoline of 3.7Mb and a draw in distillates of 3.6Mb, BUT refinery utilization dropped .8%, accounting for 1.3Mb of the draw, while actual demand for gasoline was down, indicating retailer stockpiling as oil dipped to $57 last week.

Gold was flat at $624 as the dollar held steady as well on a mixed Fed report.

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Today wasn't as exciting as yesterday but it did the job.

  • Abercrombie & Fitch Co. (NYSE:ANF) wiped out my poor caller today and I took out the $75s for .25 (up $2.25) which leaves me with a basis of $1.45 on the Dec $75s, now $1.85 (up 28%).
  • The Boeing Co. (NYSE:BA) Jan '08 $90s are now $8.90 (up 22%) and, rather than set a stop, I will get ready to sell the Dec $90s on a downturn or, worst case, the Dec $85s (currently $3.70, a $1.60 premium).
  • BEA Systems Inc. (BEAS) is not looking good at all, down 8% in after-hours as they are unable to give earnings due to "options issues." Revenues were up 19% but a touch light and the CC did nothing to make people feel better!
  • DALRQ had a heck of a morning but, ultimately, they said "no deal." I should have left my stop in as I'm back to a dime!
  • As I was away today and set auto-stops I got thrown out of Dell Inc. (NASDAQ:DELL) Jan $27.50s as they pulled back from .75 (up 36%) to .70 (up 27%) and I couldn't bring myself to buy them again at .65. This turned out to be a good thing as they delayed earnings due to an "accounting probe." I'm still a buyer but let's see where this ends up. Rules are good!
  • Green Mountain Coffee Roasters Inc. (NASDAQ:GMCR) had a great first day and finished up $1.06 at $42.56. Too bad there were no options!
  • Motorola Inc. (MOT) finally took off and the Jan '08 $22.50s are almost in the money at $3.30 (up 25%).
  • The NASDAQ 100 Trust Shares ETF (QQQQ) Dec $44s stopped out at .95 (up 36%) on an afternoon dip.
  • As expected Smith & Wollensky Restaurant Group Inc. (SWRG) was not bad, but not thrilling.
  • Tetra Tech Inc. (NASDAQ:TTEK) Dec $20s came in at .30 so hopefully not a mistake.
  • Tyco International Ltd. (NYSE:TYC) Dec $30s did come in right at .50, more than doubled and stopped out already at .90 (up 80%) on a wild day!

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