The Volatility Trader
105 W. Monument Street
Baltimore, MD 21201
Friday, February 16, 2007
Email – #249
Dear Subscribers,
Here’s the good news… Boston Properties (NYSE: BXP) is trading $5.40 under our $130 strike. And the not so good news… at last glance, the bid-ask spread on our March 2007 $130 put (BXP-OF) was $3.90 by $6.40. This is what you call good old-fashioned market maker shenanigans… and it really makes me upset.
Regardless, the closer we get to expiration, the more the spread will tighten. At the end of the day, given that the stock is trading well under the strike, we should be up over 100% in this position… Now, it’s just a matter of patience, waiting for the bid to move up, to narrow the gap with the ask. I will keep you updated on this position, and as of now, we’re sitting pretty.
Additionally, Simon Property Group (NYSE: SPG) recently failed after putting in a fresh 52-week high. The stock is currently trading at just over $116, which means we still have a ways to go before our $110 strike on the March 2007 put (SPG-OB) is achieved; however, given the larger fundamental overvaluation bombshell hanging over REITs, we could easily be in-the-money in one or two sessions.
As you know, we are hedged for both upward and downward index movement with the S&P 500 ETF SPYDR (AMEX: SPY) March 2007 $146 calls (SFB-CP) and the Dow Jones Industrial Average Diamonds (NYSE: DIA) March 2007 $126 puts (DAW-OV)…
At present, the major indexes look like they are losing upward steam. However, given the relentlessness of bulls over the past months, I do not want to remove our calls until I see further confirmation that the indexes are truly ready to roll over. The point, though, is that if bearish momentum does begin to surface in the next week, please expect an e-mail from me advising to close our calls.
You may have noticed that I’ve been trimming my e-mail correspondence a little, which is simply in an effort to not overwhelm you with too many e-mails. However, if any significant changes surface in our positions, I will certainly e-mail you ASAP.
Lastly, after countless hours of research, I am excited to present you with a new trade on Tuesday morning…
Have a great weekend,
Mark Whistler
Current Portfoli
Boston Properties (NYSE:BXP)
March 07 $130 puts BXP-OF
Purchased: 2/08/2007
Current Price: $ 3.80
Simon Property Group (NYSE: SPG)
March 07 $110 puts SPG-OB
Purchased: 1/29/2007
Current Price: $0.90
Diamonds (AMEX: DIA)
Mar 07 $126 puts DAW-OV
Purchased: 1/18/2007
Current Price: $0.65
Tyson Foods (NYSE:TSN)
Apr 07 $17.50 puts TSN-PW
Purchased: 12/18/2006
Current Price: $0.30
S&P 500 (AMEX: SPY)
Mar 07 $146 calls SFB-CP
Purchased: 11/16/2006
Current Price: $1.40
