Welcome to the TFC Commodity Trading Forum.
Please feel welcome to join in on these informative ongoing discussions about trading futures and commodities.

The Trading Forum is intended for the open discussion of commodities trading. The management of this Forum does not agree or disagree with the ideas exchanged, and does not exert editorial control over the message posted herein. Read and post at your own risk. The risk of loss in trading or commodities can be substantial. We discourage the use of this Forum to promote trading that is acknowledged to be risky. Please note: many links from the Forum lead to pages on other web sites. We cannot take responsibility for nor endorse the information presented on those sites.

TFC Commodity Trading Forum

Wall Street's Tuesday Lunch Options

Chris Tyler, Optionetics.com
February 1, 2011

Defiant protesting for a second straight session finds bulls looking for an optimistic resolution at “Highways 12,000 and 1,300.” As of 11:30 ET ET the SP-500 (SPY) is up 1.25% and challenging 1,300 once more and on the heels of a still uncorrected 21-week market upswing.

The bull is back Tuesday on continued improving sentiment regarding a contained resolution for Egypt rather than precipitating violence across the Middle East. In those intertwined markets of influence and reflective of investors reinvigorated outlook, the US Dollar (UUP) is off a stiff -0.80% and approaching a re-test of a recently cemented one-year undercut double bottom pattern.

COMEX Gold (GLD) is up a mild 0.35% as it benefits from a weaker Greenback but loses its safe haven luster amongst less buggy bulls. Technically, GLD remains in a weak consolidation pattern following a bearish triple top.

And after gushing higher by about 7.25% over two days from key uptrend support, shares of the US Oil Fund (USO) are showing some very modest profit-taking of -0.25%. With a couple bearish gaps getting filled on ultra-heavy accumulation volume, bulls could be facing a couple sessions of rest until an attempt at breaking above prior channel highs is made.

On the economic front, data has been mixed but the influential ISM Manufacturing Index has helped support the broader market. For January, a reading of 60.8 showed an improvement from December’s 58.5 level and bested Street views calling for a flat 58.4 result.

Not as good but no match for the day’s improved investor tone, construction spending for December fell by a much steeper -2.5% following November’s -0.2% and much weaker than a -0.4% economists polled by other analysts had come to expect.

On the Leaders Board and of great influence, the price-weighted Dow Industrials is enjoying another rendezvous with 13,000 compliments of Exxon Mobil (XOM). The US market’s heftiest component stock and one sporting an 80’something ticker is up 3.0% to its best levels in two years time as it continues to follow-through on Monday’s earnings-related and relative strength bid.

In earnings news, over in the Naz’100, shares of Baidu.com (BIDU) are up 8.00% after reporting all-around better-than-expected Q4 results last night. By the numbers, Baidu showed a profit beat of $0.04 on earnings of $0.50 per share on stronger-than-forecast revenue growth of 94.4%. Sales improved to $371.3M compared to Street estimates of $361M.

Management at Baidu also surprised investors with upside and slightly above-views Q1 revenue guidance. Prior to today’s price jump to fresh all-time-highs, BIDU shares maintained a “D” Accumulation/Distribution rating per Investor’s Business Daily within a late stage base and one following a heady 900%, two year run in shares.

On the option side, Baidu’s ATM Weekly February 105 / 110 strangle has been a decent winner for owners of premium at current levels. Despite fairly stiff pricing near 90% IV, that straddle has gained ground from about $5.85 to commanding $7.55 as essentially a deep in-the-money call.

On deck on the earnings front, shares of Broadcom (BRCM) are up 3.35% and seeing more than three times its daily volume on 24,000 contracts. Calls and puts are being traded evenly but in checking the board the more interesting concentration of investor interest is in the puts for a second straight session.

Earlier today in our weekly Option Watch column we discussed Broadcom’s Feb 45 straddle price reflecting trader apathy towards any type of outsized move based on current SV and IV range readings. At the same time, decent opening activity in the March 45 puts was apparent. While the trading could be the result of initiating put sellers, with today’s opening activity in the OTM Feb 44 and 45 puts, I’m inclined to give those buyers the benefit of the doubt while confidence elsewhere continues to build.

Chris Tyler
Senior Options Writer, former Market Maker & fulltime Option Hedge Hog Advocate
Optionetics.com ~ Your Options Education Site