MTnews asked:


Daily Market Commentary for July 22, 2008 from Millennium-Traders.Com

The dollar rose on the session as Treasury Secretary Henry Paulson predicted that lawmakers will pass a bill this week to shore up confidence in Fannie Mae (NYSE: FNM) and Freddie Mac (FRE). In addition, President of the Federal Reserve Bank of Philadelphia, Charles Plosser said the Fed should raise interest rates “sooner rather than later” to lower inflation. (read more)

http://www.millennium-traders.com/news/newscommentary.aspx

closing price:

DOW (Dow Jones Industrial Average) triple digit gain of 135.16 points on the day to end the trading session at 11,602.50

NYSE (New York Stock Exchange) gain of 66.91 points to end the trading session at 8,566.65

NASDAQ gain of 24.43 points to end the trading session at 2,303.96

S&P 500 gain of 16.99 points to end the trading session at 1,276.99

FTSE All-World ex-U.S. gain of 0.35 points to end the trading session at 226.74

FTSE RAFI 1000 gain of 798.31 points to end the trading session at 5,028.37

BEL 20 (BEL20) loss of 57.37 points to end the trading session at 3,058.95

CAC 40 (CAC40) gain of 0.12 points to end the trading session at 4,327.26

FTSE100 (UKX100) loss of 40.2 points to end the trading session at 5,364.1

NIKKEI 225 (NIK/O) triple digit gain of 381.26 points to end the trading session at 13,184.96

Market trends on the New York Stock Exchange (NYSE) today: advanced stocks 2,200; declined stocks 980; unchanged stocks 89; stocks hitting new highs 30; stocks hitting new lows 55. List of volatile stocks as well as stock quotes, stock prices and stock symbols of Day Trading Stock Picks on the New York Stock Exchange stock market for Day Trading online and active Day Trading for those who are or would like to be Day Trading for a living: American Express Company (NYSE: AXP) shed 2.92 points on the trading session, high on the trading session $38.55, low on the trading session $36.00 for a closing stock price at $37.99; Agrium Incorporated (NYSE: AGU) shed 2.98 points on the trading session, high on the trading session $100.00, low on the trading session $95.01 for a closing stock price at $96.64; Assured Guaranty Limited (NYSE: AGO) shed 7.43 points on the trading session, high on the trading session $11.32, low on the trading session $7.95 for a closing stock price at $11.32; Regions Financial Corporation (NYSE: RF) gained 1.00 points on the trading session, high on the trading session $11.55, low on the trading session $7.83 for a closing stock price at $11.40; XTO Energy Incorporated (NYSE: XTO) shed 4.87 points on the trading session, high on the trading session $57.09, low on the trading session $51.25 for a closing stock price at $53.11; Walter Industries Incorporated (NYSE: WLT) shed 6.29 points on the trading session, high on the trading session $96.56, low on the trading session $88.16 for a closing stock price at $90.94; Freeport-McMoRan Copper & Gold (FCX) shed 6.48 points on the trading session, high on the trading session $104.99, low on the trading session $98.29 for a closing stock price at $100.53; WellCare Health Plans Incorporated (NYSE: WCG) gained 7.02 points on the trading session, high on the trading session $38.97, low on the trading session $32.66 for a closing stock price at $36.25; CME Group Incorporated (NYSE: CME) gained 40.74 points on the trading session, high on the trading session $367.45, low on the trading session $326.67 for a closing stock price at $366.27; Devon Energy Corporation (NYSE: DVN) shed 4.46 points on the trading session, high on the trading session $102.40, low on the trading session $96.81 for a closing stock price at $98.60; Comstock Resources Incorporated (NYSE: CRK) shed 7.73 points on the trading session, high on the trading session $70.93, low on the trading session $64.01 for a closing stock price at $64.83; Ultrashort Financial (NYSE: SKF) shed 14.60 points on the trading session, high on the trading session $148.45, low on the trading session $120.99 for a closing stock price at $122.75; MasterCard Incorported (NYSE: MA) gained 5.95 points on the trading session, high on the trading session $274.87 low on the trading session $254.53 for a closing stock price at $273.85; Fannie Mae (NYSE: FNM) shed 0.72 points on the trading session, high on the trading session $13.78 low on the trading session $11.62 for a closing stock price at $13.41; Freddie Mac (NYSE: FRE) gained 0.95 points on the trading session, high on the trading session $9.95 low on the trading session $7.00 for a closing stock price at $9.70; Potash Corporation Saskatchewan (NYSE: POT) shed 6.70 points on the trading session, high on the trading session $223.15, low on the trading session $212.03 for a closing stock price at $216.05.

Market trends on the NASDAQ today: advanced stocks 1,935; declined stocks 976; unchanged stocks 113; stocks hitting new highs 46; stocks hitting new lows 71. List of volatile stocks as well as stock quotes, stock prices and stock symbols of Day Trading Stock Picks on the NASDAQ stock market for Day Trading online and active Day Trading for those who are or would like to be Day Trading for a living: Apple Incorporated (NasdaqGS: AAPL) shed 4.27 points on the trading session, high on the trading session $162.76, low on the trading session $146.53 for a closing stock price at $162.18; Millicom International Cellular (NasdaqGS: MICC) shed 22.02 points on the trading session, high on the trading session $84.00, low on the trading session $74.32 for a closing stock price at $75.48; First Solar Incorporated (NasdaqGS: FSLR) shed 14.73 points on the trading session, high on the trading session $277.87, low on the trading session $259.06 for a closing stock price at $266.45; UAL Corporation (NasdaqGS: UAUA) gained 3.42 points on the trading session, high on the trading session $8.41, low on the trading session $5.00 for a closing stock price at $8.41; Google Incorporated (NasdaqGS: GOOG) gained 4.66 points on the trading session, high on the trading session $480.25, low on the trading session $465.60 for a closing stock price at $473.46.

Market trends on the American Stock Exchange (AMEX) today: advanced stocks 608; declined stocks 591; unchanged stocks 82; stocks hitting new highs 9; stocks hitting new lows 40.

Chicago Board of Trade Futures Market activity for the day, September 2008 Contracts, at time of this posting:

E-mini S&P 500 (ES) end of day price 1,273.50, change 12.00

E-mini NASDAQ-100 (NQ) end of day price 1,826.00, change -1.50

E-mini S&P SmallCap 600 (SMP) end of day price 366.50, change 0.00

$5 DJIA (YM) end of day price 11,555, change 90

World Currencies at time of this posting:

Euro 0.632 to U.S. Dollars 1.5823

Japanese Yen 106.96 to U.S. Dollars 0.0093

British Pound 0.5011 to U.S. Dollars 1.9958

Canadian Dollar 1.0069 to U.S. Dollars 0.9931

Swiss Franc 1.0257 to U.S. Dollars 0.9749

Commodities Markets:

Energy Sector: Light Crude (NYM) shed $3.09 on the day for a closing price of the range of $127.95 a gallon ($US per bbl.); Heating Oil (NYM) shed $0.08 on the day for a closing price of $3.70 a gallon ($US per gal.); Natural Gas (NYM) shed $0.44 on the day for a closing price of $10.14 per million BTU ($US per mmbtu.); Unleaded Gas (NYM) shed $0.07 on the day for a closing price of $3.15 a gallon ($US per gal.).

Metals Markets:

Gold Market Price (CMX) shed $15.20 on the day for a closing price of $948.50 ($US per Troy oz.); Silver (CMX) shed $0.42 on the day for a closing price of $18.01 ($US per Troy oz.); Platinum (NYM) shed $42.80 on the day for a closing price of $1,808.20 ($US per Troy oz.) and Copper (CMX) gained $0.01 on the day for a closing price of $3.69 ($US per lb.).

Livestock and Meat Markets (cents per lb.): Lean Hogs (CME) gained 0.50 on the day for a closing price of 73.85; Pork Bellies (CME) gained 1.63 on the day for a closing price of 65.33; Live Cattle (CME) shed 1.10 on the day for a closing price of 104.60; Feeder Cattle (CME) shed 1.45 on the day for a closing price of 113.63.

Other Commodities (cents per bu.): Corn (CBT) shed 17.75 on the day for a closing price of 590.50 and Soybeans (CBT) gained 6.00 on the day for a closing price of 1,409.00.

Bond action for the day:

2 year bond shed 6/32 on the day for a closing price of 100 10/32 with a Yield of 2.71, Yield Change +0.12

5 year bond shed 12/32 on the day for a closing price of 99 21/32 with a Yield of 3.47, Yield Change +0.11

10 year bond shed 15/32 on the day for a closing price of 98 7/32 with a Yield of 4.10, Yield Change +0.07

30 year bond shed 18/32 on the day for a closing price of 95 16/32 with a Yield of 4.66, Yield Change +0.04

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Millennium-Traders.Com

http://www.millennium-traders.com



Patrick

John Forman asked:


Options provide great position management and risk control potential when using them to trade the market directionally. This goes beyond the simple fact that a long position in a call or put option has an absolute maximum risk equal to the cost of the option (plus commissions, of course). That, in and of itself, is a very useful thing. What this article discusses, however, are a couple of handy little things one can do while holding an option position to maximize the return and keep the risk well constrained.

Roll Up/Down

Most traders are familiar with the concept of a trailing stop whereby one moves their protective exit as the market moves in favor of the trade. This is used to lock in profits. The same thing can be accomplished when one is trading options rather than the underlying. This is done by rolling one’s position up or down strike prices depending on whether the trade is a long using calls or short employing put options.

Here’s a recent example from the author’s own trading.

A long position in Seagate Technology (STX) was initiated when the stock was trading at around 21.50 using the March 22.50 call options. They were purchased for $0.80. The market rallied over the next few weeks, eventually moving up above $24. At that point, a roll-up was executed by selling the March 22.50 calls at $2.60 and purchasing the March 25 calls at $1.40. This action served two purposes. The first is that it took $1.20 off the table, reducing the portfolio exposure and freeing up cash for use elsewhere. It also locked in a profit of $0.40 ($2.60 sales price minus the $0.80 purchase price for the 22.50 calls minus the $1.40 purchase price for the new 25 calls). At the same time, it had no effect on the remaining upside potential for the trade. The two strikes would probably profit about the same from any further appreciation in the price of STX shares.

If the portfolio exposure was deemed acceptable at $2.60, an alternate course of action would have been to sell the March 22.50 calls and not take any money out, but rather roll it all in to the March 25 calls. For example, if the position was 10 options, selling the 22.50s would net $2600. That cash could have been used to purchase 18 of the 25 calls ($2600/$140 = 18.57). By doing so, one actually increases the upside potential for the trade substantially. Of course, the full position is at risk, meaning one could theoretically lose the whole $2600 invested, which is more than could have been lost when the trade was first initiated.

Roll Forward

One of the issues with options is the limited duration they provide for holding trades. If one is an intermediate to longer-term trader, this can be an important hurdle. That said, however, in a manner similar to the roll up/down, if one wants to extend the holding period of a position it can be done by rolling forward the expiration month.

Continuing with the STX example, we can look at rolling forward. That would be accomplished by going from the March contract to the June one. As of this writing, the March 25s are trading at $2.40 and the June 25s are at $3.60. There’s the rub, though. Because of the longer time to expiration, the June contract is priced significantly higher. That is why a roll forward is often best accomplished with a roll up/down.

Consider the earlier roll-up in STX from the 22.50 call to the 25 call. If we were still in the former, and wanted to both roll forward and up, we could jump to the June 25 call. The current price on the 22.50 option is $4.10. With the June 25 at $3.60, we could accomplish both the roll up and roll forward and take $0.50 off the table. That is not quite as much as we accomplished with the roll up, but it does extend the time we could hold the position by three months. Whether that is worth the trade-off depends on the anticipated holding period for the trade.

The rolling of strike prices and expiration is something easily accomplished. The transaction costs for options trades have come down substantially for the individual trader in recent years. That opens up a great many possibilities for playing the market directionally and managing positions efficiently.



Randy

Better Trade asked:


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Dale