Email – #440
It’s an overused cliché for sure. But the current market is on track for several of them over the next two months, and they could just determine how the year and many of our positions fare.
Storm number 1: The elections.
A Democrat win will pinch the financial sector. It’s a dead heat right now. Our bet is on Blackstone which will surge with a Republican victory as it will leave current tax policy relatively free from change.
Storm number 2: This one’s literal.
We’re about two weeks away from the peak of hurricane season, and we’ve already got Gustav to deal with. This potentially major hurricane is churning the waters of the Caribbean right now. If it threatens the oil and gas interests in the gulf, we could see a spike in oil and natural gas prices, putting pressure on our Valero position which has been reacting favorably to the recent decline in oil.
It will also put pressure on our USAir position, which has already handed us hefty gains and looks promising for more gains from our spread. Higher oil prices could also affect our other anti-oil play, MGM, which surged on Friday just to give up gains yesterday.
Last week the shares came under pressure, after moving up strongly the week before. The pressure came from a news story regarding the Chinese government’s potential rule changes in Macau. This pressure was offset by a story on Friday that a Dubai Investment enterprise was considering raising its stake from 9% up to 20%.
Storm number 3: The return of business as usual after Labor Day.
Labor Day marks the end of the summer holiday season for kids and Wall Street traders alike. Volume recently has been anemic and this should change dramatically as Wall Street returns to full force in the investment and trading pits. Add to this year-end tax loss selling and we could see a spike in volatility over the next few weeks.
For the most part we are sitting on two-year positions that still have over a year to go. Our January expiry positions could perk up if we have strong year-end rally, but that is looking less and less likely. I will keep you posted on any changes that we need to make. The week after Labor Day will set the tone for the rest of the year, so we’ll wait until then to make another pick.
Karim
Current Portfoli
Company / Option: Valero Energy Jan. 2010 $60 calls
Option Symbol: YPY AL
Current Price: $1.20
Comments: Hold.
Company / Option: Blackstone Group Jan. 2010 $25 calls
Option Symbol: KJL AE
Current Price: $1.45
Comments: Hold.
Company / Option: Unisys Jan. 2010 $5 calls
Option Symbol: WUI AA
Current Price: $0.55
Comments: Hold
Company / Option: Pfizer Jan. 2010 $25 calls
Option Symbol: WPE AE
Current Price: $0.67
Comments: Hold
Company / Option: Bank of America Jan. 2010 $55 calls
Option Symbol: WBA AK
Current Price: $0.57
Comments: Hold
Company / Option: Fifth Third Bancorp Jan. 2010 $30 calls
Option Symbol: YJF AF
Current Price: $0.50
Comments: Hold
Company / Option: Sun Microsystems Jan. 2009 $5 calls
Option Symbol: XOG AA
Current Price: $0.05
Comments: Hold
Company / Option: Mylan Labs Jan. 2010 $20 calls
Option Symbol: WYQ AD
Current Price: $0.95
Comments: Hold
Company / Option: Cirrus Logic Jan. 2009 $10 calls
Option Symbol: CUQ AB
Current Price: $0.10
Comments: Hold
Company / Option: Motorola – bull spread
Jan. 2010 $7.50 call (bought)
Dec. 2010 $10.00 call (sold)
Option Symbol: WMA AU
Option Symbol: WMA AB
Current Price: $3.05
Current Price: $1.81
Comments: Hold
Company / Option: USAir – bull spread
Jan. 2010 $10 call (bought)
Dec. 2008 $12.50 call (sold)
Option Symbol: LUL AB
Option Symbol: LCC LV
Current Price: $3.50
Current Price: $1.00
Comments: Hold
Company / Option: General Electric – bull spread
Jan. 2010 $35 calls (bought)
Jan. 2010 $45 calls (sold)
Option Symbol: WGE AG
Option Symbol: WGE AI
Current Price: $1.31
Current Price: $0.30
Comments: Hold
Company / Option: Microsoft – bull spread
Jan. 2009 $32.50 call(bought)
Jan. 2009 $40 call (sold)
Option Symbol: MSQ AZ
Option Symbol: MSQ AH
Current Price: $0.49
Current Price: $0.05
Comments: Hold
Company / Option: Tenet Healthcare – bull spread
Jan. 2010 $5 call (bought)
Jan. 2009 $7.50 call (sold)
Option Symbol: YTX AA
Option Symbol: THC AU
Current Price: $2.10
Current Price: $0.30
Comments: Hold