Options Trader: Wednesday Wrapup

by: Philip Davis

100 points down on the NYSE? Ouch! 37 points off the Nasdaq, retracing half of last week's gains, the NYSE gave up all of last week's gains, and going below 8,300 takes us right back to 8/15. Not good at all!

On the bright side, today's declines were led by last year's leaders—home builders and commodities—but we are just not getting a change in leadership; we need to make it work. Perhaps the big boys are selling first and buying later. We won't know for sure until next week probably, but it will now be a miracle if this week can be saved.

Thank goodness we got out of our September calls while the getting was good! Even so, we took a lot of hits on our October positions, and I lightened up on a few in comments, but then I was foolish enough to try to pick up some "bargains" ahead of a generally disappointing Beige Book.

Oil hit my $67.50 target and stopped dead there. With inventory reports tomorrow we may be heading back to numbers we haven't seen since March.

Gold pulled back $4 after again failing to break $640. This is exactly what gold bugs did not want to happen, and rising wages by themselves will not fuel the level of inflation required to keep gold at this level with Iran fading to page 2.

Despite my own foolish buying, there was no reason to buy any of our positions today as our technicals broke down early and none of our tracking stocks held up. Following these rules would have saved me a lot of money! Remember: Do as I say, not as I do!

Today's Picks:
I took a gamble, pre Beige Book, and bought the following with just small positions:

• Barrick Gold Corp. (NYSE:ABX) Oct $32.50s for .80 to cover a poor report

• Chesapeake Energy Corp. (NYSE:CHK) Oct $30 puts for .55 - good in a bad report and also general oil meltdown

• Johnson & Johnson (NYSE:JNJ) Oct $65s for .85

• Texas Instruments Inc. (NYSE:TXN) Oct $32.50s for .80

• Garmin Ltd. (NASDAQ:GRMN) Oct $47.50s for $2

• Target Corp. (NYSE:TGT) Oct $47.50s for $2

• Bed Bath & Beyond Inc. (NASDAQ:BBBY) Oct $35s for $1

• Eagle Materials Inc. (NYSE:EXP) Jan $40s for $2.15

• Adeza Biomedical Corp. (ADZA) again at $16.45

• Nokia Corp. (NYSE:NOK) Oct $20s for .80

NASDAQ 100 Trust Shares ETF (QQQQ) $40s for .15

• Seagate Technology (NASDAQ:STX) Mar $22.50s for $1.80

• I got out of Dawson Geophysical Co. (NASDAQ:DWSN) at $28.60 (up 10%), whose profits helped me pay for this nonsense.

• I also let go of the Bear Stearns Companies Inc. (NYSE:BSC) Oct $120 puts for $1.70, (even) as I felt the calls are a better play to keep.

• Las Vegas Sands Corp. (NYSE:LVS) $70 puts for $3.30 (up 65%) were enough for me.

• I got thrown out of Harris & Harris Group Inc. (TINY) at my $2.75 stop (up 140%).

• I gave up on QQQQ, Seagate Technology (STX), QUALCOMM Inc. (NASDAQ:QCOM) and NOK literally 20 minutes after I bought them, as the Book was not what I had hoped, and I am nervously holding onto the rest.

We'll see how this goes, I used half the profits on the positions I sold to fund this nonsense, but it will be great if we get a buying binge!

• Devon Energy Corp. (NYSE:DVN) gave back 4% on the day - I hope that guy got out!

• Statoil ASA (NYSE:STO), Devon's partner on the well never really got a gain and dropped 5%, which shows you how overblown that reaction was yesterday.

• Chevron Corp. (NYSE:CVX) "only" dropped 1.7% and will make a very tempting short tomorrow!

• Caterpillar Inc. (NYSE:CAT) stopped me out with a double early in the day on a big spike.

• PetMed Express Inc. (NASDAQ:PETS) needs to be seriously considered again, now down to $9.63. The combination of the Barron's article and todays' action killed this stock. I don't want to catch a falling knife but I sure want to catch the rebound on this one!

• SmartVideo Technologies Inc. (SMVD) stopped just short of stopping me out with a 14% drop:

• Thank goodness we got out of Intel Corp. (NASDAQ:INTC)!

• We should have used the same logic on BHP Billiton Limited (NYSE:BHP), but it was just insurance on the Phelps Dodge Corp. (PD) puts. I knew it was wrong but I kept them anyway (kick, kick):

• Got stopped out of the iShares Russell 2000 Index ETF (NYSEARCA:IWM)'s at $1.90—also should have taken the money and ran! I got way too complacent from the past two weeks and should have taken much of this off yesterday when I knew I wouldn't be around to watch them...

• Got stopped out of Marvell Technology Group (NASDAQ:MRVL) just in time at $1.65, should have sold that sooner too!

POSCO (NYSE:PKX) went completely the opposite way I expected. I didn't even have a stop!

At least we had a few bright spots:

• Royal Dutch Shell (NYSE:RDS.A) $70 puts are well in the money at $2 (up 400%).

• Suncor Energy Inc. (NYSE:SU) $80 puts are also in the money at $4.80 (up 250%).

• Sunoco Inc. (NYSE:SUN) $75 puts finished at $7.80 (up 400%).

• ExxonMobil Corp. (NYSE:XOM) $67.50 puts finally came in the money at $1.05 (up 110%).

Needless to say I have very tight stops on all the oil puts as I refuse to give back profits on the few clear winners we have this week!