Options Trader: Monday Wrapup

by: Philip Davis

Pretty dull today, but that certainly beat the alternative!

US Markets 06 02 2007 Chart

Bugs 06 02 2007What's not dull is M&A activity, which is actually accelerating over last year!

We were worried that we got off to a slow start, and I said in the beginning of the year that we need to match last year's pace if we are to get to Dow 15,000, but State Street Corp (NYSE:STT) ($4.5Bn) and Triad Hospitals Inc. (NYSE:TRI) ($4.4Bn) have pushed the global total to over $300B in the first 35 days of the year already -- nice going rich guys!

We haven't even had a blockbuster takeover yet. Genentech Inc. (Private:DNA) is still swimming around, as is Washington Mutual Inc. (NYSE:WM) (come on Citibank, you know you want it!) and Suncor Energy Inc. (NYSE:SU) is up on rumors as are half the oil patch, a dozen HBs and every biotech you've ever heard of.

CONTEST: FREE 1 Month Membership to whoever guesses February's biggest deal (can't be announced yet, time-stamp of comment breaks ties, 1 guess per person, must be 18 to enter and a legal resident of the Milky Way Galaxy).

Oil was dull, finishing down .28 at $58.74, splitting the difference between the $59 I said it would test and the $58.50 I said was the true resistance! You have to admire the guts of these traders (cough-hungover-cough, cough) as they held onto 346M March barrels, moving 5M to April (140M) and 1M to May (60M) with just 10 trading days left until the Feb 20th (Tues) settlement.

We had a full weather report in comments but the short story is that it's pretty warm in Europe which, much to the surprise of many Americans, is part of the World (as in GLOBAL oil demand). ZMan missed his $60 top call by just .05 this morning and if you haven't read his "divergence from the divergence" theory in today's post you really should!

That feisty dollar went and tested the 200 DMA again -- running up to 85.20 and closing up at 85.11 looking dangerously like a bullish pennant. Gold stayed up at $656 but poor copper is now testing $240 with a chart that can turn very ugly very fast.

Oil Dollar Gold 06 02 2007 Chart

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  • I made my first bottom call on American Express Company (NYSE:AXP) -- we'll see how that goes!
  • I said to watch Fidelity National Financial Inc. (NYSE:FNF) and their earnings were off by half! Title revenues (derived from home transactions) were off 8.5% for the year and the stock dropped 4% after hours.
  • Las Vegas Sands Corp. (NYSE:LVS) $100 puts came in for $2 and the earnings were a little disappointing but I'm not getting too excited until we see what the morning brings us.
  • Overstock.com Inc. (NASDAQ:OSTK) came in as expected, disastrous! Herb Greenberg thought I was too easy on them this morning when I said "It would be funny if they actually make a profit but why break the trend?" Herb said, over at Seeking Alpha: "CEO Patrick Byrne is lucky because an investment firm he controls is his company's largest shareholder. It it weren't, and he were a mere employee (as are most CEOs) he would've been fired long ago for incompetence."
  • Ryanair Holdings plc (NASDAQ:RYAAY) jumped up too fast to play, with a 5% gain at the bell but our British Airways plc (NYSEARCA:BAB) Mar $105 puts were already in our hands and ran up to $2.15 (up 39%) still making a good hedge against our oil puts.

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