Option Investor

On the "Watch" List - EL

Printer friendly version

A "Key" Moment!

Until Wednesday, the primary trend in equities was, at best, "neutral" and there was little reason for concern with the majority of bearish positions in the MCM Portfolio. However, the broad rally in stocks boosted virtually every market sector and a number of previously mediocre industry groups, including consumer non-durables (CND), were resurrected by the surge in buying pressure. Estee Lauder (NYSE:EL), which resides in the category known as Personal Products, is considered a CND and that segment was definitely a beneficiary of the bullish activity.

While we don't see any major change in the outlook for EL, there is certainly potential for additional upside momentum due to the widespread rebound in share values. If this condition persists on Thursday, it may be prudent to make an exit or adjustment trade in the position. Our suggested strategy, which was described in detail in the Portfolio Activity Blog on 3/24, involves a transition to a neutral calendar spread. In addition, traders who want more information on the concept of "selling time" can review the narrative posted on 3/14. Readers who are not yet comfortable with adjustment techniques should consider a simple "buy-to-close" order for the short (APR-$45 call) option.

Look for additional comments on the issue during Thursday's session.

MCM Staff

Monthly Cash Machine Newsletter Archives