TEN Exclusive: Options Update – 9/1/10

Wow, what a way to kick off a new month.  After a very rough August, investors were determined to get September off to a good start.  They didn’t waste anytime as the market opened solidly higher and held on to its gains the entire session.  It was upbeat economic data from China and Australia ahead of the open that had traders frothing at the mouth. Traders also cheered the latest manufacturing data from the Institute for Supply Management (ISM), which reported that its index of factory activity improved to 56.3 in August.

Yesterday we were sitting near key support levels and by the close today we were testing key resistance levels.  How much sense today’s move makes with Friday’s key nonfarm payrolls report still to be reported, remains to be seen.  Some good news on Friday could send this market much higher especially when you consider that today’s move was driven by good news out of China, but their market closed lower.

The key level to watch tomorrow is the 1081 level on the SPX, which is the 50-day moving average.  We’re not sure which way this market will break form here, as it all hinges on Friday’s report.  1100 or 1055 on the SPX is a 50/50 proposition bet at this point.

Weekly Economic Calendar:

Thursday

• We’ll get the weekly report on new jobless claims, along with July reports on factory orders and pending home sales. Del Monte Foods Co. (DLM) and H&R Block Inc. (HRB) will report earnings.

Friday

• The Labor Department’s numbers on nonfarm payrolls and the unemployment rate in August. The ISM will also release its services index for August. Campbell Soup Co. (CPB) will report earnings.

New Trade Idea:

Buy Research in Motion (RIMM) September 42.5 Put @ $1.55 or Better:

RIMM decided to participate in today’s rally but with subpar volume.  We remain skeptical of RIMM’s short-term prospects and will look for a quick retracement.  Use $3.00 for a target and $0.85 as a mental stop-loss.

Open Positions:

Buy Las Vegas Sands (LVS) September 29 Puts @ $1.20 or Better:

LVS bounced with the overall market but continue to hold using $2.00 as a target and $0.65 as a mental stop-loss.

Buy Amazon (AMZN) September 120 Puts @ $1.80 or Better:

We were stopped out of this position today.

Visa (V) September 67.5 Puts @ $1.05:

We were stopped out of this position today.

Related Reading:

• TEN Exclusive: Options Update – 11/21/10
• TEN Exclusive: Options Update – 11/14/10
• TEN Exclusive: Options Update – 10/27/10

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