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Wall Streets Thursday Lunch Options

By Chris Tyler, Optionetics.com | Thu March 15, 2012 10:07AM PT


One $600 Apple product and a “1400 doji app" is keeping the bull somewhat under wraps Thursday. As of 11:45 ET the SP-500 (SPY) is up 0.25% but still toying with key resistance and trying to shake off Fibonacci and Newton’s law of gravity.

Money is still growing on trees and one influential apple (AAPL) has still failed to drop other than the 2.5% intraday surrender from a nearly perfect test of $600. “Nearly perfect?” Given Friday morning’s anxiously oversubscribed rollout of its third generation iPad and one [Wif-Fi + 4G and 16GB] which retails for $629 at AT&T and Verizon; now that would be perfectly ripe stuff.   

In other less-pressing matters, economic news has been supportive with a foursome of reports proving either spot-on or pleasing eye candy for the day’s headlines. Weekly claims fell by 14,000 to 351,000 and proved better than forecasts of 355,000. Continuing claims also suggest a potentially stronger labor market with a figure of 3.34M dropping from 3.42M and striking a new intermediate low.

A pair of regional manufacturing reports showed an improving economic picture. The Empire Survey surprised with its increase from 19.5 to 20.2. Forecasts had called for a dip to 15.0. Intraday, the Philly Fed saw an in-line increase to 12.5 from 10.2.

And rounding out those officially-sanctioned reports, total producer price data for February reflected a month-over-month increase of 0.4% versus estimates of 0.5%. Axing the little things in life such as food and energy, core levels rose by an in-line 0.2%.

In those intertwined markets of notice, other than Apple’s $600 price tag and the SP-500’s tangle with 1400, the transports (IYT) which have been technically grounded of late are enjoying a bit of a late “All Aboard!” signal for bulls to hop on board. With the IYT up 2.25%, airlines (UAL, DAL) are in the pilot’s seat and led by US Air’s (LCC) gain of nearly 7%.

Lower oil (USO) prices have been cited as the catalyst for today’s bid in the group. As discussed on Tuesday though, a hot and bothered bull looked ready for a technical take-off in US Air and its shares. At the same time, heavy OTM April 6 put volume, while appearing to be the work of bearish buyers, was approached as a “marriage of opportunity” for bulls looking for higher prices using long stock plus a protective put.

Black gold, as mentioned, is under some pressure today. Word on the Street is the new iPad will be powered by batteries and not gasoline powered. Kidding aside, prices are “tumbling” per CNBC or off 0.70% and holding key weekly support per other less sensational observations, after a report the US and UK are planning a joint release of strategic oil supplies in an effort to prevent high fuel prices from derailing the economic recovery.

The CBOE Volatility Index ($VIX) is mostly quiet near 15% and just off five year lows. Following short-term complacency signals generated earlier this week, fresh bullish initiations, particularly of the gravity-defying type like Apple, become much riskier. I suppose that’s just some food for thought?

And the 20-Yr (TLT) is up narrowly by 0.25% at 111.30. The price action is testing the 200SMA from below after a dramatic two day plunge by Apple noshing bulls rotating out of the traditional safe haven. Technically, TLT is also setting up as a near five-month double bottom pattern. The last time bulls felt so compelled, the SP-500 carved out a nifty top some 10% lower back in late October which led to a decline of roughly 10%.

Finally and in those sometimes accurate heat-seeking option markets, are you unsure how to “handle” the market going forward? Given the run, if you haven’t already considered portfolio protection, attractive premiums and the use of a beta-weighted value, can go a long ways towards preserving some unusually strong profits while allowing for continued upside…well, in Apple at least.  

 

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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