Market Flat Ahead of 9/11 Anniversary
Trading is flat today as both the bulls and bears pay respect to tomorrow’s 9/11 anniversary. The market has been in a tight range and the headlines have been mildly positive.
The Commerce Department reported wholesale inventories rose 1.3% in July, which was well ahead estimates and the best performance since July 2008. Sales at the wholesale level increased 0.6%, which was double what most economists were looking for and the best showing since April.
In corporate news, Texas Instruments (TXN, $23.40, down $0.44) narrowed its sales and earnings forecast for the current quarter after the bell last night. The company said it now expects revenue in the range of $3.6 billion to $3.8 billion, compared with a previous range of $3.55 billion to $3.85 billion. As far as earnings per share, the chip-maker gave a range of 66-72 cents, versus previous estimates of 64-74 cents.
In earnings news, Lululemon Athletica (LULU, $39.90, up $4.06) shares are up 11% after beating analysts’ expectations. The company reported a profit of $22 million, or $0.30 a share, versus $9 million, or $0.13 a share, in the year earlier period. Revenue came in at $152 million, up from $98 million. Wall Street was looking for earnings of $0.24 a share on revenue of $146 million.
Here is another great example of a great straddle or strangle option trade and we had factored in a 10% move for the stock. We were watching the October 30 puts (LULU101016P00030000, $0.20, down $0.50) and the October 40 calls (LULU101016C00040000, $2.15, up $1.30) and before the close yesterday these two options would have cost you a total of $1.55. The put options were at 70 cents while the call options were at 85 cents before the shut the lights off yesterday in the option pits.
A 10 contract trade would have cost you $1,550 and today the total position would be worth $2.35. The calls are at $2.15, the puts at 20 cents gets us this total. Folks, this is a return of 52% in less than a day. Not bad.
We have to be honest, our website says we don’t do strangles and straddles but it has been killing us by not profile them as protection. In any event, we are going to start profiling a few of these trades in our Weekly Wrap. These types of options plays are working in this range bound market and we haven’t covered them because the “experts’ say they are too hard to learn.
We have added some new writers to our research team who have been bringing you great stories over the past few months. Our goal is expand our Weekly Wrap to provide you with more coverage on growing your wealth with different option strategies. We will go into covered call writing, debit/ credit spreads, and of course, straddles and strangles option trades. With covered call writing, we will be adding stocks as well which is why we are trying to cover two unique companies a week.
We think you will be excited about our changes and we look forward to bringing more option trades. We will have more details in this weekend’s edition.
As far as the market today, the Dow is up 18 points to 10,433 while the S&P 500 is higher by 2 points to 1,106. The Nasdaq is down 5 points to 2,231.
We will be back Sunday afternoon with the Weekly Wrap and next week should provide more clues as to which way the market will break. For the record, we think there will be one Tech company which could either light a fire under the bulls or be the one high-Tech name that gives the bears some ammo to punish this market. We are entering the crucial point where companies usually warn of earnings misses and we have seen a few signs of that this week. Third quarter earnings start in October so the next two weeks should be very interesting.
Subscribers, we have added a few charts to some of current trades, so, if you just read our email alerts, check the Members Area for a great snapshot of what we are looking at.
Have a good weekend everyone and thanks to the men and women who protect our butts day in and day out!
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