Options Trader: Thursday Wrapup

by: Philip Davis

Darn, I always miss the fun days!

Today is a great example of why we love mattress plays - it is so much easier to cover and stop out of one position than to furiously buy and sell dozens of stocks whenever we have a dip. Today’s action was so nice and smooth; even my auto stops worked out just fine.

I’m not too excited. Basically we are right back to where we were Wednesday morning, but it sure beats the alternative, doesn’t it? March sales gave us a nice boost as consumer spending marches on no matter what happens in the world. SOX and Nasdaq had a huge day while the bankers continued to be weak. This will be a nice change of leadership if it sticks, but we really need these commodities to calm down a bit.

Oil is back over to almost $64 despite 39M barrels being lopped of the front three months delivery. The score is now: May 183M, June 245M and July 108M. 183M barrels is still a lot. It was an amazing display of pricing power, however, as the May contract, despite a net loss of 58M barrels (20%) in one day, managed to gain $1.84, significantly more than the months in which people were adding barrels. It really is fun to watch, but not if you’re short on oil - then it’s just frustrating!

Our Research in Motion Ltd. (RIMM) $130 puts were frustrating if you ignored rule #1 and didn’t sell at the open. The .60 puts we’ve been buying for over a week shot up to $1.85 at the open, but quickly fell back to $1.55 (where my stops triggered) and ended the day at .90, despite making no great recovery - a very textbook example of why we ALWAYS sell into the initial excitement!

The transports picked a funny day to get going, but they did stop dead at the 50 dma so we’ll have to wait and see what happens there but we got a little greener and that's all that counts:













Fib Level


Dow 12,553 68 12,400 1,245 12,528 12,650
Transports 2,819 27 2,736 2,817 2,889 2,983
S&P 1,447 9 1,410 1,426 1,427 1,460
NYSE 9,477 64 9,250 9,250 9,218 9,465
Nasdaq 2,480 21 2,400 2,440 2,454 2,500
SOX 475 5 470 472 477 490
Russell 815 7 790 798 803 820

US Markets

Despite the dollar making a two-year intraday low (and finishing there), gold was fairly flat a $682 but it will be all up to the PPI tomorrow, so stay tuned.

Oil and Dollar