As expected it was a pretty dull day.
Nobody wanted to commit one way or the other ahead of the jobs report but it was evident that FXI and PTR were done going down by 10:17 when I called an end to those hugely profitable puts. It’s always difficult to say goodbye to our big winners and often we take the sting out by rolling (kind of the options way of saying "I’ll call you baby") but we turned bullish as we held our levels and we expect a Hang Seng bounce into the weekend.
RIMM was the topic of the day with close to 50 of 400 comments relating to that one stock. This was partially my fault as we decided to make a complex butterfly spread first thing in the morning, based on my prediction that the only thing we could be certain of was that both callers and putters would lose their ridiculous premiums in the morning. Our play went like this:
Buy RFYVR Oct 90 PUT $3.70
Sell RULVT Oct 100 PUT $8.45
Sell RULJT Oct 100 CALL$6.10
Buy RULJB Oct 110 CALL $3.10
We collected $7.75 (a little better than planned, it never hurts to ask!) making the play and risk losing $2.25 so if we are up $4 in the morning we may as well take it rather than let this crazy stock ride for a month. RIMM actually beat estimates and gave strong guidance but I maintain it is still not enough to justify the 150% increase in the price of the stock over the past 12 months. We adjusted the puts mid-day to grab an extra $1 which allowed us to pull back 20% of the callers and putters, which cuts our maximum gain slightly but prevents us from being tragically wrong.
We also took two diagonal plays on RIMM
Optrader came up with the Dec $103.38s at $9.90, selling the Oct 95s, which were outrageously priced at $9.15 so we took those along with another set of the December calls against the Nov $100s at $9. These plays are against what we call the "volatility crush" something we featured in Option Sage’s educational segment last February. We will make many of these plays during earnings season, it will be fun to see how they go.
Factory orders were quite a bit worse than expected and the fact that it "just didn’t matter" kept us in a bullish mood for the day. We did stick with our plan of shorting VNO and BXP and both stocks were kind enough to come in at our low offers as they finished the day at their highs.
Other than that, it was a pretty dull day as we wait patiently for the jobs report, which I’m pretty sure is the product of some random number generator anyway as we routinely get revisions of 30, 60, even 120% to prior months yet the market insists on using these numbers as an excuse to shoot off in one direction or the other and CNBC treats it like the tablets are coming down from Mount Sinai so all we can do is play along…
Oil jumped $1.50 to finish the day at $81.44 as the dollar fell back below 78.5 and gold went back to $744 after a mini-pullback from $755 so we took a few more gold and oil plays ahead of the weekend.
