Options Trader: Tuesday Wrapup

by: Philip Davis

Look, we're floating!

Is it just temporary or have we finally entered The Final Frontier? If so, our 5% Rule mission is to seek out new highs and investment opportunities -- to boldly trade at market levels where no trader has invested before!

This morning we talked about perspective and I set some pretty greedy levels, but we hit them!
Dow 12,331 -- 31 points over goal and strong all day. Can we do better? Absolutely, we are still eating the Nikkei's dust!

  • Transports finally kicked in but fizzled at the end of the day at 2,650.51
  • The S&P was strong all day too, finishing just under 1,415
  • NYSE finished at 9,064, very nice!
  • Nasdaq was not as strong but held 2,452
  • The SOX closed at 487 so we blame them but it was good progress!
  • The RUT did not hold 800 but finished at 797

US Markets 6 12 06

Space Trader 6 12 06So we have to keep an eye on the Russell, the SOX and the Transports tomorrow, consider them the last small tugs of gravity as we finally leave this tiny planet and all it's annoying problems behind us and become Space Traders!

Oil dropped a penny. As expected they tested $63.09 (made it all the way to $63.20) fell all the way to $61.55 (surprising) and finished back at $62.48.

I got my test, and they bounced off $63.09 hard so I'm happy, but the best part is that happened as the dollar went even lower! Well, it's a disaster that the dollar went even lower than the lowest it's been since March of 2005, but shhhhh -- the children are rallying...

Oil was savaged in the early morning trading, rescued as Europe closed but sold off into the NYMEX close on this day before inventories. Once again we have one of those days where the contracts you don't see dropped a lot faster than the contract that is manipulated for your viewing pleasure.

As expected, gold did the same nothing the dollar did and held $652, but Barrick Gold Corp. (NYSE:ABX) Dec $27.50s stopped us out at $3.50 (up 112%) on the morning dip. I'm looking at AngloGold Ashanti Limited (NYSE:AU) Jan $50s for $1.15 as a possible move, but we need to watch that $650 line, the dollar, and how AU handles it's own 200 DMA at $46.50 before getting back in a gold trade.

Oil Dollar Gold 6 12 06

On the whole it was a great day for the markets. There were some great gainers like Qualcomm Inc. (NASDAQ:QCOM) (+3.6%), Yahoo! Inc. (NASDAQ:YHOO) (+2%), International Business Machines Corp. (NYSE:IBM) (+1%) and Walt Disney Company (NYSE:DIS) (+2.3%) that gave us a great indicator of overall strength. With very few decliners, we can safely assume that new money continues to pour into the market in record amounts.

When will it stop? I don't know but let's enjoy the ride and stop asking if we're there yet!


  • Best Buy Co. Inc. (NYSE:BBY) stopped us out of the Jan $52.50s early on a spike and dip at $4.30 (up 43%).
  • Boston Scientific Corp. (NYSE:BSX) had a huge day and a Cramer pump ahead of the FDA decision on stents. I'm thinking of selling calls against our Jan '08 $17.50s, currently $2.40 (down 4%), but good news could really boost this one.
  • Circuit City Stores Inc. (NYSE:CC) also dipped and gave me the opportunity to take out the Jan $25 caller at $1.55 as we let the leaps ride.
  • Our Chevron Corp. (NYSE:CVX) Jan $70 puts came off the table at .95 (up .05) with the ExxonMobil Corp. (NYSE:XOM) puts on the turn this morning.
  • We didn't get our price on the eBay Inc. (NASDAQ:EBAY) Jan $32.50s ($1.25), but the Dec $32.50s came in at .60 and finished at .75 (up 25%).
  • Pfizer Inc. (NYSE:PFE) stopped us out of the Dec $25s at .40 (up 100%) but we let the Jan $25s ride at .80 (up 45%).
  • Starbucks Corp. (NASDAQ:SBUX) officially got away from us. I'm really mad as I called the exact bottom at $35 and then waited for another pullback that never came! Hopefully it will bounce back off the 50 DMA tomorrow and give us an entry.
  • Patience may be a virtue with Sirius Satellite Radio Inc. (NASDAQ:SIRI) as it weakened at the end so I'm glad I waited (so far).
  • sanofi-aventis (NYSE:SNY) Mar $45s came in too high at $2.50 and were not chased.
  • I added the Energy Select Sector SPDR ETF (NYSEARCA:XLE) $60 puts for .85 and they dropped to .65 at the end of the day (down .20). It was a small entry and I chose not to add to it, but we will see where we are ahead of inventory tomorrow.
  • I had to take the ExxonMobil Corp. (XOM) Jan $75 puts for .90 on the morning spike, just like yesterday's CVX play we took half off at $1.10 but then got rid of the rest for $1.10 rather than wait as oil was already turning by 10:55.
  • You can see what kind of market it is when Yum! Brands Inc. (NYSE:YUM) has to shut down 5 Taco Bells for e coli and it's taken as a buying opportunity. The stock finished up 2.6% today!


Oh come on -- tell me Cramer doesn't read this blog!

He's on Mad Money talking about exactly what we've been talking about all weekend -- how not all trades we (sorry he, I get confused when everything else is identical) discuss are appropriate for all readers viewers. The only difference is he's figured out a way to sell another book on the subject!

Read all of Phil Davis's articles on Seeking Alpha