Option Investor

Portfolio Review

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Friday was a "banner day" for investors as stocks moved sharply higher amid optimism over the future direction of interest rates. All of the major equity averages closed within striking distance of multi-year highs and the bearish trend appears to have "run its course" after causing grief and consternation for less than a month.

Our portfolio has endured the wrath of the recent volatility but thankfully, there were no
unmanageable surprises and the current return on investment is well above the monthly target. Among the positions on the "watch" list, 3M Company (NYSE:MMM) appears to be the most tenuous as the issue is now less than $1 below the sold (call) strike in the bearish spread. A recent test of technical resistance near that price did not end with a decisive outcome as the stock simply transitioned to a consolidation pattern. The coming week will likely determine the direction of MMM's share value in the near term; a continued broad rally in equities would almost certainly seal its fate.

One other issue emerged during our scan for unusual portfolio activity. ImClone Systems (NASDAQ:IMCL) has climbed $5.34 in the past two weeks, closing at $42.87 on Friday afternoon. Although the stock price is far from the sold (call) strike at $50, the sharp increase in buying pressure certainly warrants attention during the next few sessions. Traders who don't want the responsibility of monitoring the potentially volatile issue could simply exit the short option in the spread for a debit of $0.05 per contract. Based on a 5 contract position, that would result in a $200 profit, minus any commission costs.

Our search for new positions is underway...be sure to check the MCM Newsletter, or your E-mail inbox, on Sunday for additional credit-spread candidates.

MCM Staff

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