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TFC Commodity Trading Forum

Wall Street's Thursday Lunch Options

Chris Tyler, Optionetics.com
January 13, 2011

With gains in hand and a mixed, lesser crop of catalysts, bulls opt to cautiously graze in front of Intel, JP Morgan and a bevy of economic reports spearheaded by retail sales. As of 11:05 ET the SP-500 (SPY) is off -0.10% and holding onto technical-based resolutions to keep 2011 a good one.

In economic news, Thursday’s weekly claims data saw frown lines appear on bulls faces in the premarket but unworthy of producing any hard stampeding to take profits. Analysts having come to expect a slight increase of 5,000 to 415,000 were greeted with an actual figure of 445,000, though continuing claims data did fall by 248,000 to a level of 3.8M.

Separately and also mixed, total PPI data for December rose 1.1% in eclipsing forecasts of 0.8%. However, axing the little things in life such as food and energy, analysts were pleased to learn prices rose by an in-line 0.2%.

On the earnings front but most all eyes turned towards Intel (INTC) and JP Morgan (JPM), Naz’ 100 component and India-based IT Services giant Infosys (INFY) has fallen victim to too much of a good thing. INFY is off -5.50% in nothing short of actual correct-to-a-point “profit-taking” with shares successfully testing 50SMA support at session lows.

Infosys managed a top and bottom line beat and issued upside, above views guidance, but bulls are not entirely surprising showing a bit of appreciation for gravity rather than tenacity as the stock powered through prior all-time-highs set back in 2007 by nearly 30% this past quarter.

In Infosys’ option market’s, it turns out some highly-favored investor attention paid towards the January 75 puts in Wednesday’s session and discussed on these pages yesterday, have come in quite handy for both bearish speculators or bulls simply wishing to shore up today’s more widely-accepted risk in shares.

With INFY near 72.50, the Jan 75 put which traded nearly 3,000 contracts on the session has more than doubled in value from $1.30 to $2.80 per contract. That good fortune for premium buyers had to overcome a spot-on volatility crush assessment into the mid 20s, by utilizing the full support of delta and its attached sidekick gamma.

In those sometimes intertwined markets of influence, a surprisingly strong bearish price break by the US Dollar (UUP) and inversely correlated lift in the EUR/USD has equally amazing, not helped the broader market or dollar denominated commodity complex (GLD, SLV) find a bid on the session.

Reaction Thursday appears tied to the ECB and Bank of England leaving key lending rates and the latter, its asset purchase plan, unchanged. While the reports were purported to be in keeping with analyst views, confirmation, along with a couple more of this week’s plentiful “successful debt auctions” in tow—have nonetheless resulted in bulls yearning to increase their appetite for risk.

Intraday, shares of UUP are off a strong -1.20% after gapping easily below 50SMA support. The key moving average had already been broken once in recent weeks during an admittedly incorrect technical call of a bullish “W” developing in the currency proxy. “BOO-yah! Indeed.”

Finally and in other corporate news outside of the well-treaded “Intel and JP on Tap” story mesmerizing Thursday’s script writers, shares of Dow component Merck (MRK) are trying to influence market bulls, to a minor degree, “to schnitzel a little” with its company-specific dose of bad news.

The pharma giant announced unfavorable clinical studies changes to its cardiovascular medicine Vorapaxar following studies from two academic centers. Intraday, shares of MRK are off -6.50% and breaking the hearts or umm cardiovascular systems of bulls looking for support from virtually every known moving average respected by technicians.

Chris Tyler
Senior Staff Writer & Options Strategist
Optionetics.com ~ Your Options Education Site