THE SHORT-TERM CONSENSUS HOTLINE (SAMPLE)
Index Options Report – Tuesday,
July 25, 2006 after the close
Dow 11,104 (+53)
September S&P 1271.50 (+4.00)
Nasdaq 100 1490 (+7)
Nasdaq Composite 2074 (+12)
Russell 2000 697 (+7)
September Bonds 107^16 (-^06)
VIX 14.85 (-.13)
There goes the triple top in the S&P Futures at 1269.00.
Late Tuesday the S&P convincingly took out the resistance at the 1269 level as it surged to a high of 1278.70, but then pulled back into the close. Pretty impressive action so far this week with the Russell 2000 rebounding better than 4% from Friday’s new lows to today’s (Tuesday’s) close.
But there are some problems. Notably, once again the Nasdaq is lagging, still unable to return to last week’s highs both in the Composite and NDX. Add to this the McClellan Oscillator now overbought at +121. And as you know the next upside target in the S&P (previously cited as best case for the week) is not far from today’s highs – the July 12 gap at 1282.30.
Meanwhile we continue to cut back in our bullish positions as the market rebounds. Today (Tuesday) taking profits in our short QQQQ puts.
OEX CALLS
Nothing for now.
OEX PUTS
Once again sidelined, after taking profits last week in our (3) short
August 525 puts. If the market sells off again though, we will be interested
in returning to this well, once again selling the (3) August 525 puts,
the OEBTEs, at 1.80 GTC. (If you are still holding the protective
puts from the last time around, then you are all set and needn’t
buy any additional protection.)
SPY CALLS
No positions for now.
QQQQ CALLS
In the August QQQQ calls we are well hedged, still holding our (3) bull
spreads, long (3) August 35 calls, the QQQHIs, from 1.50, hedged by (3)
short August 37 calls, the QQQHKs, from .80. Now we want to add
another (3) short August 37 calls to the mix at the same price of .80.
To write the additional calls, you will probably need to buy some
cheap protective calls above the market, like the August 39s or 40s.
QQQQ PUTS
Finally. On Tuesday, we easily got our price of .30 to
cover the (5) short August 35 puts, the QQQTIs (short from .50). The trade
resulted in a profit of $100 on the short puts, before commissions. Now
standing aside.
DJ OPTIONS
Standing aside for now.
EQUITY OPTIONS
EBAY 24.66 (-.47) A rising tide lifts all boats…except
for this boat. For now we remain short (2) of the October 27.50 puts,
the QXBVYs, from 1.50. The puts closed at 3.50 bid. As previously suggested,
“Certainly hedging the short puts with some protective puts
at a lower strike would make sense.” In addition, as you know,
we have been trying to buy (2) of the October 22 ½ calls, the QXBJXs,
at 3.20 GTC. These calls made a low on Monday of 3.30 as the stock bottomed
at the 24.05 level. Closed on Tuesday with a bid of 3.40. As noted,
“here we are just making the bet that the stock gets back to 26
sometime between now and October (doesn’t seem like such a stretch).”
OIH 139.29 (+5.19) Now it really hurts. The OIH has now shot up over 6% off of Monday morning’s low to Tuesday’s high. The August 130 calls that we tried to buy at 6.00 on Monday (and bottomed at 6.40 that morning) have now shot up to 11.90 as of Tuesday’s close. Recall that in premarket trading on Monday, just minutes before the opening, the OIH traded down to new lows for the year. That’s all that we would have needed – the same pullback a few minutes later into the opening – to have gotten our price of 6.00 or lower in those August 30 calls. Oh well… Pretty frustrated here, we will now cancel instructions to buy the OIH August 30 calls and stand aside.
H. Schiller
Released Wednesday morning, July 26, 4:43 A.M. Eastern