Options Trader: Wednesday Wrapup

by: Philip Davis

Japan was open today, our markets went up.

Japan will be closed tomorrow but the Hang Seng and the BlackRock New York Insured Municipal Inc (NYSE:BSE) will be open. The Hang Seng is an international market, the Shanghai Exchange is closed for the week. I think this is a great time to see where our money really comes from.

We had a pretty busy day today and after hours we had great news from Symantec Corporation (NASDAQ:SYMC) and not so great news from Las Vegas Sands Corp. (NYSE:LVS). It's not as bad as it sounds, though, as this is just another company being punished for making investments that don’t pay off in the same quarter.

Hello Kitty

Carl Icahn is punishing Motorola, Inc. (MOT) for the same behavior, so I guess investors won’t be satisfied until U.S. corporations stop doing any R&D or capital investing and simply drain the registers through dividends and buybacks until they implode. Oh wait, we did that already - but that was 20 years ago, so I guess it’s time to go again now that we have a whole new generation of suckers to get left holding the bag.

Speaking of suckers, I often complain about ridiculous manipulation of stocks, but can you be any more obvious than that pointless spike in Sunoco, Inc. (NYSE:SUN) at 11:30 yesterday. I thought I missed it at 11:43 in comments when I said: "Oh man, what was that spike in SUN??? I can’t believe I missed shorting that! Might have been a mega-pump spike prior to a big drop!"

But they did it again [along with Tesoro Corp. (NYSE:TSO)] and ran the June $75 puts all the way down to $1, which made them a great earnings gamble. Those contracts were at $4.50 just 10 days ago and there is nothing in Exxon Mobil (NYSE:XOM) or Chevron Corp. (NYSE:CVX) or
ConocoPhillips' (NYSE:COP) earnings to indicate that SUN, although refiner heavy, should be an $80 stock.

TSO forced us out of the closer calls on their mega pump and we had to retreat to June and August positions as well as a bear put spread on the May $125/$120s suggested by Optrader. We’ll see in the morning whether they can live up to HIGH expectations but I say NO WAY!!! We took a spread on JDS Uniphase Corporation (JDSU) that went well, but even with 20% trailing stops yesterday, we only managed to close three more positions, so it must have been a very good day!

We got rid of the Amazon.com Inc. (NASDAQ:AMZN) June $45s at $16.75 (up 644%) and the
MasterCard Incorporated (NYSE:MA) spread stopped out with an 86% loss (-$2.50) on the June $110 puts and a 312% gain (up $7.80) on the June $120 calls.

The markets did great today as the continued fall in oil prices boosted the transports with our XALs (airline index) leading the way:















Dow 13,211 75 12,468 12,600 13,000 13,500
Transports 2,874 32 2,825 2,900 3,000 3,250
S&P 1,495 9 1,430 1,460 1,500 1,550
NYSE 9,718 78 9,218 9,465 9,600 10,000
Nasdaq 2,557 26 2,454 2,500 2,600 2,750
SOX 498 4 477 490 500 560
Russell 828 12 803 820 850 900
Click to enlarge

US Markets

Markets are looking really good, but I reserve judgment until I see what we can do when both Japan AND China are closed for the next two days. Of course, with two major markets closed over there, you would think Europeans would just buy U.S. companies out of boredom...

Oil took yet another 1% dip yesterday but oil companies flew up on news of the always impending rebel attack in Nigeria that is virtually guaranteed, as crude challenges the 200 and 50 dma at $63. Failure at this level could lead to a very nasty downturn, so expect A LOT of rebel activity and possibly a statement from Chavez. If that doesn’t work, the Saudis will announce that they didn’t get all the terrorists and then it will be time for Iran to do something nutty again.

The dollar continued to gain ground, also a possible side effect of closed Asian markets but there are so many people short on the dollar that a move over 82 (now 81.75) could cause a nasty short squeeze that could propel us back to 83 for a retest of the 50 dma. Gold did not like that one bit and fell another $2 to bounce off its 50 dma at $670.


In short - lots and lots of level testing will make for an exciting end to what I told you on Monday was going to be an exciting week!