The Volatility Trader
105 W. Monument Street
Baltimore, MD 21201
Monday, December 18, 2006
Email – #238
Tough Times For Tyson
Dear Volatility Trader Member,
December options expiration came and went, and it’s now time for us to look forward for some new trades, the first of which we’ll implement today.
Before we get to our new trade, today has treated our portfolio well, with declines in our put positions on Vornado Realty Trust (NYSE: VNO), Mattel (NYSE: MAT) and Payless Shoesource (NYSE: PSS).
With four weeks to expiration, I’d like to exit these trades by the first week of January, so as to not fight time decay. But as usual, I’ll keep you posted if there any changes.
New Trade
Moving on to our new trade today, we’re going to buy puts on Tyson Foods (NYSE: TSN). The stock has made a significant recovery from lows in the early part of 2006, due to fears regarding avian bird flu.
And while Tyson Foods is a stable company, there’s a ton working against all meat processors right now, including industry-wide INS raids on meatpacking plants. And to make things worse, Tyson Foods is expected to miss earnings estimates in 2007, by roughly $0.50 a share.
Overall, the market is far too optimistic about the recovery of the U.S. chicken market. And bird flu hasn’t completely disappeared from the headlines just yet… with the spring migration season of bird from Asia right around the corner. All that spells risk for buyers of Tyson Foods.
I expect profit-taking to commence soon.
Consequently, buy the April $17.50 puts (TSN PW) for no more than $1.50. Close the position if the stock closes at, or above the strike price.
Exit is everything,
Mark Whistler
Current Portfoli
Tyson Foods (NYSE: TSN)
Apr 07 $17.50 puts TSN-PW
Purchased 12/18/2006
Current Price NEW. Buy at $1.50 or better.
Payless Shoesource (NYSE: PSS)
Jan 07 $30 puts PSS-MF
Purchased 12/6/2006
Current Price 0.35
Mattel (NYSE: MAT)
Jan 07 $25 puts MAT-ME
Purchased 11/22/2006
Current Price 2.10
S&P 500 (AMEX: SPY )
Mar 07 $146 calls SFB-CP
Purchased 11/16/2006
Current Price 2.05
Vornado Reality Trust (NYSE: VNO)
January $125 Puts VNO-ME
Purchased 12/6/2006
Current Price 3.20
