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Wall Street's Tuesday Lunch Options

By Chris Tyler, Optionetics.com | Tue March 20, 2012 9:51AM PT

A few bulls are still calling on their brokers in more than one way, but China-driven growth concerns are ushering in a bit of March Madness for the broader market. As of 11:30 ET the SP-500 (SPY) is off 0.50% and challenging that milestone victory marker of 1400.

Chinese officials disrupted the games stateside bulls have been playing of late by announcing overnight plans to hike fuel prices for a second time this year. The report comes at the same time officials from its metals industry warned of reduced steel production due to waning demand; which combined have reignited global growth worries.

Stateside, bulls are calling on key financial heavies (XLF, WFC, JPM) sans Bear Sterns or Lehman, to keep Tuesday’s mild bout of March Madness looking orderly and of more interest to bargain-hunters rather than profit-takers after an extended multi-month run from October’s corrective low to near four-year highs in the SP-500.

Allowing for some additional grazing Tuesday morning, Dow constituent BofA (BAC) is up 2.0%. The country’s largest bank stated it would not be looking to dilute shareholder value with a secondary offering following last week’s well-received pass of its government-sanctioned stress test. In sympathy, shares of Goldman (GS) are up a similar 2.15% and giving its Muppets, umm clients, something to smile about.

In those other and very often intertwined markets of notice, Apple’s “iPayVer$2.65” (AAPL) is a bit less of a tempting bite for bulls Tuesday. Shares are trading off 0.95% after establishing a mini double top pattern off a test of all-time-highs at $600 following its first-ever quarterly dividend pledge.

At more than 4% of the SP-500 and the market’s most influential ticker, AAPL's in-line 1.04 Beta is looking as though it wants to roll out its old school growth format Beta Ver.2.0 with shares off nearly double the SP-500.   

Shares of the US Oil Fund (USO) are off 1.65%. Tuesday’s less optimistic growth sentiment, as well as Monday’s supply nod from Saudi Arabia and word Iran reassured its neighbor Kuwait it wouldn’t close the Strait of Hormuz are the primary drivers behind the price drilling. Technically, shares of USO remain positioned within a bullish consolidation now four weeks in-the-making which has found support off its November highs and test of its 50SMA.

Metals gold (GLD) and silver (SLV) are less precious by 0.75% and 2.50% respectively and trying to build the bear case for even lower prices out of potential grizzly flags below each ticker’s 50 and 200SMAs. A modestly bid US Dollar (UUP) and similar demand anxieties are central thorns in bulls hoop dream ambitions.

And the VIX ($VIX) is up a none-too-impressive 3.0% to 15.50%. The modest but far from anxious bid puts the sentiment gauge into a test of its 10SMA. To some extent, the action does neutralize last week’s overly-complacent investor thesis as the instrument is a mean-reverting creature. That said, with no signs of that other “mean” or any real March Madness to speak of during 2012’s tournament, those underdog bears are growing on this market strategist.

Finally, in those sometimes accurate heat-seeking option markets, a decent sized audience of bulls is hungering for more delightful games to emerge in Lions Gate Entertainment (LFG). Calls have been trading strongly Tuesday by a 7-to-1 margin over puts as shares stage a four-week long flat base breakout.

The film studio’s anxiously-awaited Hunger Games movie is set to open this week. Industry buzz has been strong in front of the release with pre-purchase sales already topping former records held by similar young adult series and cult favorites Harry Potter and Twilight.

Most active on the day are the out-of-the money April 16 call on volume of 4,000 that’s surpassed open interest of 3,200. With shares at $15.53, the price for admission of $0.65 per head or umm, contract is expensive compared to both statistical and range implieds of the past couple months. That said and taking a cue from the 16’s well-traded and surrounding 15 and 17 strike calls sporting half the attendance of today’s feature show; the bullishly-positioned long butterfly might make for better foraging for hungry bulls.


Chris Tyler
Senior Options Writer, former Market Maker & fulltime Option Hedge Hog Advocate
Optionetics.com ~ Your Options Education Site
Visit Chris Tyler’s Forum
The information offered here is based upon Christopher Tyler’s observations and strictly intended for educational purposes only, the use of which is the responsibility of the individual. 


Recent articles by Chris Tyler, Optionetics.com

September 21, 2012  -  Wall Street's Friday Lunch Options
September 21, 2012  -  Hot Shots: All Aboard or Train Wreck?
September 20, 2012  -  Wall Street's Thursday Lunch Options
September 19, 2012  -  The Expected Move: Bed Bath & Beyond Earnings
September 19, 2012  -  Wall Street's Wednesday Lunch Options


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