Option Investor

Waiting to exhale...

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Only one week to go!

With only 5 trading days until the April options expiration, the MCM Portfolio is performing very well and only one of our conservative spread candidates is on the "watch" list. Obviously, that issue is Estee Lauder (NYSE:EL) and although we can't find any conspicuous reason for the stock to move higher, it appears the recent lateral pattern may be resolved to the upside in the coming week. While we believe the bullish potential is limited, there is no reason to accept a loss when we can make an adjustment that may result in a (eventual) profit. With that idea in mind, we are going to recommend the purchase of JUL-$45 call options (a calendar spread) if the share price continues to rise in the coming sessions. However, we don't want readers to enter the position with a (pre-market) buy-stop order because EL occasionally "gaps" higher near the open, before returning to the day's normal range. Instead, we plan to monitor the issue closely and watch for sustained buying pressure with at least moderate trading volume before initiating the covering strategy. We hope there will be no need for a Trade Alert but if it is necessary, the delay for "trend confirmation" should cost no more than $0.10-$0.15 per contract (and it may forestall a pointless transaction).

MCM Staff

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