Options Trader: Thursday Wrapup

by: Philip Davis

It was a wishy washy day on the markets, but we took the opportunity to lighten up on a few calls while entering some more oil puts (so far, so bad!).

Analog Devices, Inc. (NYSE:
ADI) gave a good report and got the SOX in gear which kept the Nasdaq afloat: Toll Brothers, Inc. (NYSE:TOL) had a report that was so bad it actually made their stock go down (and you thought it would never happen!). The industrials dragged everyone else down as oil climbed back to $61, ruining the party for everyone.

Like I said, if only it weren’t for the Dow:

• Dow fell 52 more points to 12,686.
• Transports held up at 2,974.
• S&P held 1,456.
• NYSE held 9,433.
• Nasdaq went up 6! Finishing at 2,524 - just one shy of my goal!
SOX flew to 486!
• Russell gained two, finishing at 829.

US Markets

So we will ignore the Dow for today and move on - the next move is up to Asia and Europe and we’ll see how they respond to weak industrial and rising crude prices.

We had a big drawdown in gasoline (3.1Mb) and distillates (5Mb) that offset a 3.7Mb build in crude and oil touched $61.25 during the day before falling back to $60.85. Despite the rally, I decided to peg small entry positions off our watch list in several of our target companies. Perhaps we’ll get a better entry on our next rounds, but I didn’t mind buying April and May puts at these prices.

In the first day of new NYMEX contract trading we’re shaping up like this:

• April Open: 340K (+5K) $60.85 (+.88)
- 244K contracts traded today.
• May Open: 127K (+18K) $62.05 (+$1.16)
- 68K contracts traded today.
• June Open: 103K (-1K) $62.84 (+$1.31)
- 29K contracts traded today.
• July Open: 36K (+1K) $63.48 (-$1.40)
- 10K contracts traded today.

Gold dropped back a touch but held $681 while the dollar actually poked back over the 50 dma at 84.5 for a minute, still teasing us…



Lots of things happened today:

• Microsoft (NASDAQ:MSFT) was ordered to pay Lucent a $1.52Bn fine for stealing MP3 tech.
• DaimlerChrysler AG (DCX) did their best Rodney Dangerfield impression saying "Take my Chrysler - Please!"
• "Hedge Funds Gone Wild" will continue be seen in all major markets as the "Presidential Working Group" of the Treasury, the Fed, the SEC and the CTFC all say hedge funds are all good! "Now, "it’s an entirely different situation," Mr. Paulson (what a surprise!) said. "What we’ve emphasized is market discipline."