Options Trader: Wednesday Wrapup

by: Philip Davis

Well we got our "ho-hum" another record day! Not even the Fed can stop this market (although I bet they would have had there not been political pressure against it).

Mr. Jones put up another 6 points pulling out of a tough mid-day slump below 12,100. He loved the Fed, then hated the Fed, then decided he loved the Fed again making for a very exciting finish that the VIX just slept through.

The S&P had http://stockcharts.com/gallery/?spx">far less doubt, never getting too negative on the day and adding 5 points to finish above 1,380, yet another breakout!

The NYSE also had no doubts today and even took a brief look over 8,800 at the close. Even the Nasdaq showed some spunk with early day leadership and a strong finish above that pesky 2,350 line.

The SOX put in a strong performance with a 2.5% gain, flying over the 50 DMA to finish at 455 while the transports, beyond all reason, decided today was the day to break back up!

The transports were extra impressive as oil gained $2.05 to finish way up at $61.40, still below my $61.69 danger zone, but not enough to keep us in November oil puts.

I was lucky enough to call for a cover on ExxonMobil Corp. (NYSE:XOM) $70s at $1.40 as Valero Energy Corp. (NYSE:VLO) flew up on the inventory report, which was a surprising build, but not smart enough to ride out the full day's rise to $2.10 (up 55%). I took a quarter and ran as it lowered my basis on all those dreadful November puts and that was good enough for me.

We'll do a post-mortem on them later, but there was no choice but to surrender as XOM flew up $1.50 for the day -- earnings tomorrow!

Gold did nothing impressive, up $3 for the day as a weak Fed led to a weak dollar.

The Fed gave an almost identical statement to the September 20th statement that kicked this current rally into high gear as the Fed told us things that just didn't matter! It should be noted that the day AFTER that statement, the Dow began a 2 day drop that shaved 100 points off. Did it matter? Of course not!

Tomorrow we get Durable Goods at 8:30, New Home Sales at 10 and the Money Supply at 4:30. By the time we know the money supply it will be too late because the GDP is coming at 8:30 on Friday morning and expectations are low but possibly not low enough.

If we can somehow get past Friday with 12,000 intact, we may be in for some real fireworks next week!


Google Inc. (NASDAQ:GOOG) is barreling towards $500, making me very sorry I sold the $470 calls, but very happy I took some of that money and bought $510 calls for $4.50, just so I wouldn't feel silly in case Google did something crazy like gain $14 in one day! I maintain a fairly tight stop on the calls as I can almost always buy them back later the same day.

Goodbye and good riddance to the November oil puts! They were a sorry bunch of losers and needed to be put down. Today gave us a good opportunity as oil dipped in the morning, giving us a little value and I was able to lower the basis across the board with a quick day trade on the XOM cover play.

If you haven't read the post on covers please do as it's relevant to any volatile sector play as well as earnings plays where you might not want to overexpose yourself to events (like a GDP report) that can wipe you out.

There were a lot of oil plays and they took a lot of damage -- I will post them up on the spreadsheet tomorrow, but I also picked up a set of December calls with half the recovered money as an initial play:

  • XOM Dec $67.50 puts for $1.15
  • VLO Dec $50 puts for $1.20
  • MUR Dec $50 puts for $1.75
  • COP Dec $60 puts for $1.25

All of these puts, except XOM, held their value fairly well while the Novembers, had I kept them, were decimated! As soon as I saw Bush on TV I started selling and within 5 minutes I was happy I did...

We detailed the President's speech in comments so I won't get into it here but, needless to say, Democrats are weak-kneed, cut-and-run tax raisers, as opposed to the strong-willed, shock-and-awe tax cutters that need your support before your family, you nation, your very way of life is torn apart...

These guys are good!

$2.6B is being spent to wage this election and it's already very ugly. Harold Ford and Bob Corker are going at each other tooth and nail in a wacky Tennessee race!

That was all it took (Bush, not Ford and Corker!), along with a drawdown in crude, to send oil flying. Zman did an excellent wrap-up of the day in oil so I'll leave it at that.

  • Allegheny Technologies Inc. (NYSE:ATI) did have very good earnings and it did go up 4% today, but Titanium Metals Corp. (TIE) did nothing! Our Dec $35s held fast at $1.70 (up 36%).
  • Sirius Satellite Radio Inc. (NASDAQ:SIRI) finally came down to $3.69, the day after I gave up and paid $3.72!
  • American Express Company (NYSE:AXP) is coming back slowly but surely but, as expected, mirrors the Dow.
  • Amgen Inc. (NASDAQ:AMGN) finally got it in gear and the $75s finished the day at $1.75 (up 20%).
  • You know things are weird when Yahoo! Inc. (YHOO) gains 4% on the day!
  • Symantec Corp. (NASDAQ:SYMC) was a huge disappointment with a penny miss on 7% better revenues. Guidance was in-line but the company dropped 7% after hours.
  • Zimmer Holdings Inc. (ZMH) was a .02 beat but guidance was blah and they dropped 3% in late trading.
  • Microchip Technology Inc. (NASDAQ:MCHP) also missed and dropped 4% on in-line earnings and lowered guidance.
  • Johnson Controls Inc. (NYSE:JCI) had pretty good numbers with a penny beat and in-line guidance but went nowhere.

Perhaps the markets are in a less forgiving mood today?

Read all of Phil Davis's articles on Seeking Alpha.

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