Stock futures here in the U.S. are posting gains with S&P futures (sp03h) gaining 4.7 points to 859.40, while NASDAQ futures (nd03h) tick higher by 7 points at 991.50, while Dow futures (dj03h) gain 28 points to 8,075.
Fair value for the S&P 500 today is $0.08. That price will not change during the session. HL Camp & Company has their computer set for program buying at $0.13 and set for program selling at $-2.37. Fair value for the NASDAQ-100 today is $1.50.
This weekend's breakup of Space Shuttle Columbia over the skies of Texas does have Dow component Boeing (NYSE:BA) $31.59 trading lower at $30.81 over the New York ECN, while Lockheed Martin (NYSE:LMT) $51.05 slips to $49.76 in pre-market trade. Also seeing downside action are shares of Alliant Techsystems (NYSE:ATK) $54.36 at $49.02 as the company's Thiokol Propulsion division builds solid rocket boosters for the space shuttle. The "greater weakness" in Alliant Tech. (ATK) is seen on thought that any delays in NASA's shuttle program would have greater ramifications for Alliant Tech., which isn't as diversified in its business as Boeing (BA) and Lockheed Martin (LMT).
In this Saturday's market monitor at OptionInvestor.com, I put together some potential hedge strategies for shares of Boeing (BA) and Lockheed Martin (LMT), though it is not clear just what may have caused the Shuttle Columbia's breakup after reentry to the earth's atmosphere. Here are some excerpts from the market monitor and strategies may also be applied if felt needed with Alliant Techsystems (ATK).
Boeing (BA): Stock has been rather bearish since breaking below trend back in mid-June of last year at $57. Currently, a trade at $30 would be a reversing point and figure sell signal for this Dow component, and at $30, would have an initial bearish vertical count of $24. This $24 level, based on initial bearish count would be my first assessment of downside risk to those holding long. It would be my view that it may take 2 to 3 months of fact finding and analysis by NASA officials to make any type of "determination of fault" and a BA bull looking to hedge a long underlying position in the stock might look to the May $25.00 puts (BAQE) as an option to hedge a BA stock position. A May expiration put contract allow the investor holding the underlying stock of BA time to then assess and process future information released as it relates to today's events. The holder of a May $25 BA put allows the trader the right, but no obligation to sell the stock at $25.00 on or before May expiration, which is May 16, 2003. Note: May $30 BA put (BAQF) and MAY $27.50 (BAQY) would also be appropriate hedge options to consider. A trader holding long the underlying stock of BA, that may have been "losing conviction" toward the stock before today's events may also look at selling an at the money call option EQUAL TO the number of shares currently holding long (example: 100 shares = 1 contract), garnish the premium sold from the call to work down the cost of the "hedge" and price paid for the put option. This may only be relevant to investors holding upward of 500 shares.
Lockheed Martin (LMT): After giving a double-bottom sell signal at $53, and breaking of bullish support trend at $52, shares of LMT have currently generated a bearish vertical count of $42. A trade at $48 would be deemed further bearish and have the stock generating a spread-triple bottom sell signal. Hedge strategies here have me looking at expiration of March, June, September with the June $50 puts (LMTRJ) and June $45 puts (LMTRI) as potential hedge option candidates. Note: Similar strategy of selling covered calls to offset purchase of protective puts could also be used.
Note: According to Dorsey/Wright and Associates, both BA and LMT have been categorized as "Aerospace/Airline." According to Dorsey/Wright and Associates, their Aerospace/Airline sector bullish % (BPAERO) achieved "bear confirmed" status just yesterday after reversing to "bull correction" status on January 23rd.
Swedish telecom equipment maker LM Ericsson (NASDAQ:ERICY) $8.13 saw its shares fall as much as 14% in Stockholm trading on Monday after the company warned first quarter sales may decline by more than the seasonal average of 30% and reported its 7th-straight quarterly loss. Pre-market action here in the U.S. has the stock off $0.82 from Friday's close, or 10% at $7.31.
Shares of Intel (NASDAQ:INTC) $15.70 are gaining 10-cent a share in pre-market trade as other semiconductor names track higher in this morning's pre-market, despite the World Semiconductor Trade Association reporting that chip sales shoed their first month- over-month decline in global semiconductor sales in a few months. The Trade Association said chip sales fell 2.3% to $12.53 billion in December from a revised $12.83 billion in November. For 2002, global chip sales rose 1.3%.
The Semiconductor Trade Association added that it expects "improvement across broad product sectors, positioning the industry for 19.8% growth in 2003, increasing revenues to $169.3 billion."