TEN Exclusive: Options Update – 2/21/10
Sunday, February 21st, 2010Written by Dan Micovic
The short week got off to a great start and the indexes were able to add to that strong start the rest of the week. The Dow is now just shy of breakeven for the year to date.
The good news for the bulls is February’s expiration-week rally pushed the SPX back above its 80-day moving average that we have been highlighting the past few weeks. The SPX also closed just above its 50-day moving average on Friday afternoon, but we would like to see a few days of follow-thru before we call that level conquered. Investors could have used Friday and the break above the 80-day as an opportunity to sell and to take profits. That they chose to keep buying is a positive.
The SPX has now closed higher for six out of the past eight sessions and this may be a perfect time for some consolidation and perhaps even a slight pullback. We don’t expect anything significant nor long-lasting. The VIX has declined for eight straight sessions and that may indicate that investors are getting too comfortable and its time to put some fear back into the market.
We will be cautiously bullish this week. We don’t expect any great decline in the indexes.
Weekly Economic Calendar:
[private_Options Update]
Monday
- There are no economic reports slated for release on Monday. Constellation Energy Group Inc. (CEG), Campbell Soup Company (CPB), Lowe’s Companies Inc. (LOW), Brocade Communications Systems Inc. (BRCD), Nordstrom Inc. (JWN), and RadioShack Corp. (RSH) will report earnings.
Tuesday
- The Case-Shiller home price index for December and the February consumer confidence index will be released. Barnes & Noble Inc. (BKS), The Home Depot Inc. (HD), Liz Claiborne Inc. (LIZ), Macy’s Inc. (M), Office Depot Inc. (ODP), Sears Holdings Corp. (SHLD), Target Corp. (TGT), Autodesk Inc. (ADSK), and STEC Inc. (STEC) will release earnings.
Wednesday
- Only the weekly report on U.S. petroleum stockpiles will arrive on Wednesday. American Tower Corp. (AMT), Chico’s FAS Inc. (CHS), Dollar Tree Inc. (DLTR), Garmin Ltd. (GRMN), Saks Inc. (SKS), Toll Brothers Inc. (TOL), Transocean LTD (RIG), Trina Solar Limited (TSL), Blockbuster Inc. (BBI), Limited Brands Inc. (LTD), and salesforce.com inc. (CRM) will report earnings.
Thursday
- Traders will see weekly initial jobless claims, January’s durable goods orders, and the FHFA housing price index for December on Thursday. Coeur d’Alene Mines Corp. (CDE), Frontier Oil Corp. (FTO), H.J. Heinz Co. (HNZ), Kohl’s Corp. (KSS), Newmont Mining Corp. (NEM), Sirius XM Radio Inc. (SIRI), Crocs Inc. (CROX), Deckers Outdoor Corp. (DECK), The Gap Inc. (GPS), OmniVision Technologies Inc. (OVTI), Weight Watchers International Inc. (WTW), and Wynn Resorts Limited (WYNN) are scheduled to report earnings.
Friday
- Friday brings a close to the week, with the revised fourth-quarter gross domestic product (GDP) reading, February’s Chicago purchasing managers’ index (PMI), January’s existing home sales, and the final reading on the University of Michigan’s consumer sentiment index for February on tap. BioScrip Inc. (BIOS), James River Coal Co. (JRCC), and Mirant Corp. (MIR) will release earnings reports.
New Trade Idea:
Buy the International Paper (IP) March 24 Calls (IUI100320C24) @ $1.35 or better:
Buy the Ambercrombie & Fitch (ANF) March 35 Calls (ANF100320C35) @ $1.65 or better:
Open Positions:
JP Morgan (JPM) March 38 Call (JPMCC) at $2.35:
Continue to hold but be ready to take profits above $3.00. JPM has retraced to its support level and the 200-day moving average is approaching the 30-day moving average. With JPM at its 7-month low, this looks like a good entry point on the 38 calls for a nice short-term gain.
Apollo Group (APOL) March 60 Put (OAQOL) @ $3.30:
The puts easily hit our target on Friday for a terrific +61% profit. Nice trade!
All stocks and options shown are examples only. These are not recommendations to buy or sell any security. Any pricing or potential profitability shown does not take into account your trade size, brokerage commissions or taxes which will affect actual investment returns. Annualized returns are shown to assist in comparing investment of different durations only. Stocks and options involve risk and are not suitable for all investors and investing in options carries substantial risk. Prior to buying or selling options, a person must receive a copy of Characteristics and Risks of Standardized Options available at:
http://www.cboe.com/Resources/Intro.aspx .
Investors should be cautious about any and all stock or option recommendations and should consider the source of any advice on stock or option selection. Various factors, including personal or corporate ownership, may influence or factor into an expert’s stock analysis or opinion. All investors are advised to conduct their own independent research into individual stocks before making a purchase decision. In addition, investors are advised that past stock or option performance is no guarantee of future price appreciation or depreciation. Those involved with the preparation and distribution of this report may have had in the past, currently hold, or may purchase in the future stock and/or options in companies discussed in this report. [/private_Options Update]
