The Option Investor Newsletter Monday 10-07-2002 Copyright 2002, All rights reserved. 1 of 2 Redistribution in any form strictly prohibited. In Section One: Wrap: The Floor Drops Out Futures Wrap: Key Supports Lost Everywhere Index Trader Wrap: Weekly Fund Wrap: Dog Days of Fall Futures Traders Corner: Index Futures Primer Updated on the site tonight: Swing Trader Game Plan: Like a first date, with your first true love. Posted online for subscribers at http://www.OptionInvestor.com ******************************************************************* MARKET WRAP (view in courier font for table alignment) ******************************************************************* 10-07-2002 High Low Volume Advance/Decl DJIA 7422.84 - 105.56 7637.91 7404.94 1787 mln 303/1460 NASDAQ 1119.40 - 20.50 1145.79 1113.36 1406 mln 385/1008 S&P 100 396.15 - 7.07 408.26 394.80 totals 688/2468 S&P 500 785.28 - 15.30 808.21 782.96 RUS 2000 338.29 - 9.69 347.98 337.57 DJ TRANS 2058.57 - 79.11 2139.48 2050.92 VIX 49.18 + 2.90 49.71 46.28 VIXN 62.32 + 2.04 62.48 59.69 Put/Call Ratio 1.04 ******************************************************************* The Floor Drops Out by Steven Price I have always tried to trade what I see, rather than what I feel. I kept seeing repeated support at the 7500 level in the Dow, the 800 level in the S&P 500 (SPX.X) and the 400 level in the S&P 100 (OEX.X). However, the market has "felt" bearish. Now that we have broken these levels and closed below them, what seemed an appropriate level for a bounce has wilted. There are still some intraday lows below us in the SPX and OEX, that could provide some support, but that is looking less likely now that we have closed below the aforementioned levels. In the Dow, we are below July levels and must look back to 1998 for support at the 7400 level and then the 7000 level back in 1997. The breakdown below these levels is significant, but what could be even more significant is whether we now find resistance here. Look for intraday resistance for evidence of another leg down. Chart of The SPX (S&P 500) and OEX (S&P 100) Chart of the Dow The S&P Banks Index (BIX.X) once again sought out new lows today. The Kbw Bank Index (BKX.X) has not yet crossed its July low, but is heading in that direction. We have now reached a crucial level in support for the group that can be seen in the weekly chart below. If support at this level of 235 in the BIX is broken, expect another quick drop to around 210. The Wall Street Journal reported that J.P. Morgan (JPM) is getting ready to cut more jobs. Last month, JPM announced that its earnings would be significantly lower than expectations, partially as a result of trading losses and bad loans to the telecom sector. Now the speculation is that it will be cutting jobs from the mergers and acquisitions, private banking and underwriting departments, and is mulling about 4,000 job cuts. The company releases earnings on October 16, which would be the most likely time for the official announcement. Similar reports have circulated about Merrill Lynch, which has already cut about 15,000 jobs this year, and Credit Suisse First Boston and Goldman Sachs. Investment banking activity has shrunk considerably, with very few mergers and IPOs taking a chance in the current market environment. In the late nineties, these banks expanded rapidly in those departments to keep up with demand at that time and are now severely overstaffed. What is equally as troubling is the pattern that followed JPM's announcement about non-performing debt. Last week, Comerica (CMA), Bank of New York (BK), and Northern Trust (NTRS) also issued warnings related to bad loans. It will very difficult to get a significant rebound in the broader markets if the banks are just now starting to release details of how the recent economic downturn has caught up to their bottom line. While BK identified the telecoms as a source of bad loans, as well, Comerica cited loans to the retail, automotive and manufacturing sector. Comerica and Northern Trust, which are regional banks, showed us that it is not just the big banks having problems. Goldman Sachs downgraded several specialty finance stocks, due to a lower intermediate term outlook on credit, housing and growth. Those stocks include Americredit (ACF), which concentrates on auto financing, Capital One (COF), which focuses on credit card lending and Household International (HI), which has both consumer and credit card divisions. Daily Chart of the S&P Bank Index Weekly Chart of the S&P Bank Index The retail sector seems to be picking up steam to the downside as we approach the holiday season. Holiday sales account for a large percentage of the year's profits for most retailers and the summer and fall sales warnings are bringing ominous projections for the winter. Over the summer, retailing giants such as Wal- Mart (WMT) and Federated (FD), which owns Bloomingdale's and Macy's, repeatedly missed same-store sales numbers. We either got sales at the low end of projections, or complete misses as the summer turned to fall. The slowdown was repeatedly blamed on warm weather keeping shoppers outside, rather than in stores, and the lack of need for cool weather clothing. The slowdown was followed by warnings last week from Aeropostale (ARO), citing a lack of customers in shopping malls, and Wet Seal (WTSLA), both teen-oriented clothing stores. Today, Sears (S) warned that problems with its credit division would lower third quarter and full year results. They tried to spin this by saying that strength on the retail side helped offset issues at its financial services division, however, if customers can't pay for the goods they purchased, I'm not sure how strong that retail side can really be. In light of other retailer's warnings, it is also hard to imagine how only Sears is doing well. Investors didn't buy that line, either, as they sold off retail stocks across the board. As we head toward the holidays, the West Coast dock lockout is starting to have a more pronounced effect, as well. While the White House has decided to get involved in the dispute, there are a couple of issues that are hurting retailers. First, simply the lack of goods that can be put on shelves leads to lower sales. But there is also the issue of higher alternative transportation costs, as full overseas charter flight fees have increased by $100,000.00 per trip in some cases. Current higher fuel costs don't help the cost of air transport, either. In addition to those costs, there will now be a delay in getting these ships back overseas to pick up more goods to be delivered closer to the holiday season, which will extend the effect for several months after any settlement. The Retail Index (RLX.X) has now broken below its July closing low and shows little sign of slowing down. There will likely be a boost to the sector when the lockout is settled, but the damage has been done. The lockdown is also leading to layoffs for workers used to ship and stock goods, and hitting U.S. agriculture, which relies on the ports to export food products. Another sector that has led the current slide is the semiconductor group, which reflects overall tech demand. It seems almost redundant to talk about more downgrades to this group, but that is what happened again today, as Prudential cut estimates on several chip stocks. Prudential downgraded its Communications Semiconductor rating to Market Underperform from Market Outperform. Individual stocks that saw cuts were Broadcom (BRCM), Cypress Semiconductor (CY), LSI Logic (LSI), Emcore (EMKR) and Microtune (TUNE). The Semiconductor Sector Index (SOX.X) sought out yet another 4-year low and looks like it is headed to 200 before finding any real level of technical support. In fact, Merrill Lynch was left holding the bag and may become an involuntary owner of up to 18% Chartered Semiconductor Manufacturing (CHRT), as it was the lead underwriter of a $633 million rights issue that was vastly under subscribed. The software industry got a mixed message, as well. While Oracle (ORCL) said it expects a recovery in 2003, it also said that it did not expect things to get better in the short-term. This sounds like pretty much the same rhetoric we have been hearing since the market started dropping in 2000. Chart of the SOX American Airlines' parent AMR Corp (AMR) said it will take a $990 million charge to write down the carrier's entire goodwill balance. This basically measures the amount AMR overpaid in the acquisitions of AirCal, Reno Air, AMR Eagle and TWA. On the positive side, Cambridge Consumer Credit reported that Americans are spending less on their credit cards. The index, which dropped 3 points in September to 53, surveys consumers to find out if they have increased or paid off debt in the last month, what they plan on doing with their debt in the next month, and in the next six months. The reality gap, which measures the difference between what consumers said they would pay off and what they actually did, dropped 3 points as well. A Federal Reserve report also indicated a slowdown in consumer credit. The Market Volatility Index (VIX) is once again approaching the 50 level, closing today at 49.18. The last 3 times we have hit 50 in the VIX, market rallies have followed. While these rallies followed volatility spikes, it is certainly worth noting that a VIX over 50 has been the precursor to temporary bottoms. Of course, it has usually stretched a bit over the 50 level before that rally has taken place. See the charts below for a comparison of the VIX and the Dow. Charts of the Market Volatility Index (VIX.X) and the Dow All signs are certainly bearish and I would be extremely careful with long positions. Now that we have broken the July lows and support levels, it seems that we will most likely re-test 7000 in the Dow. The previous downside-measuring objective discussed in this column based on the head and shoulders break was right around 7100, and I would look for a slowdown at that level. That would probably put the VIX in the high 50s again as well, the point at which the market previously bounced. With President Bush's speech about Iraq tonight, we should get a good look at just how the markets will react to his plan. If the war rhetoric heats up, we will most likely head down in the morning. I'm pretty sure he will make some positive remarks about the economy and defend the impact a war would have on us. However, if form holds, tough talk from the President should send us down tomorrow. ************ FUTURES WRAP ************ Key Supports Lost Everywhere Broken Record: Several key indices and many stocks make another new multi-year today (again). In a sentence, Markets closed Under some rather key support numbers today. Morning’s rally was completely wiped out by the close. Dow cash lost 7500 support to close at 7422 -105. Dow lowest close in 4 years. SPX cash lost 800 support to close at 785 -15. OEX lost 400 support to close at 396 -7. QQQs traded under 20.0 support SOX Semi index lost 225 support to trade under 220 near end of day. NDX traded at new multi-year lows of 800. VIX fear-gauge at 49. MSFT somehow managed to close green today (grin) and CSCO traded under $9.00. This was the third day in a row that the Dow was –200 points off its intraday Highs. As odd as it may sound, the selling all afternoon was rather orderly without the feel of any mass panic. RECAP of last 24 hours: Sunday night: Japan's Nikkei quickly falls 300 points from its Fri close at 9000, and spends the day going sideways at approx 8700. Sunday 3:00 AM - Europe gaps down, drifts higher, but closes Red. Monday: Pre-market: Sears (S) warns and will result in the RLX retail index making new lows right above the psych support of 250. ORCL had bearish comments re Europe software spending. CSCO's CEO made bearish comments. Dock Strike On Friday, there was a rumor of the West Coast dock strike ending this weekend. By this morning, it became obvious that indeed was not the case (bearish news). As written in Sunday's wrap, the Fri Futures 4pm to 415pm close rally felt more like last minute shorts covering vs. real buying. This proved to be correct when ES (Emini SP futures) were down by 10 points at 9:30 AM today, 9:30 AM Prices: ES (Emini SP futures): 796, YM (Dow futures) 7485, NQ (Ndx) 816 This Monday's gap down was Bought – perhaps with the memory of last Monday and Tuesday rally of Dow +300. News of President Bush considering taking action in the West Coast dock strike added fuel to the short-covering rally. 9:40 AM: Rally over: ES 806, YM 7570, Dow cash 7600, NQ 825 While only lasting 10 minutes, ES rallied 10pts and YM (Dow) futures +100 points in those brief 10 minutes. This also was upside gap fill to Friday's 4:15 PM futures close to the tick (806). Dow Cash 7600 proved to be large resistance and the entire market started to roll-over as the morning's news was digested. 11:15 AM: ES 792, Dow cash 7470, NQ 808, ES 793 was Friday's low and proved to be support as shorts 'tried' but failed to take ES under the next lower support at 790. As mentioned in the Market Monitor, this area was a 'high risk long entry' or a good place to cover the short from Dow 7600. 12:30 PM: ES 809, Dow Cash 7635, NQ 830, MSFT 45.00 (DAY HIGHS) A nice 90 minute rally followed the 11:15 AM lows. Based on no news, simply that ES double bottom at Friday's lows of 793 (and failure to go under 790 ES) proved to be an area where shorts covered. ES 809 had been mentioned as the next higher pivot if/when 805 was taken out, and that area did indeed provide a good long exit / open short level. At this point, Dow cash is +100 for the day. Ever notice how some days, when the 'lunch' buyers are done buying, the high for the day is set about 12:30 PM? 12:30 PM -3:50 PM Not much to say except the only thing the market did the next 3.5 hours was Sell Stock as every uptick was sold into. ES 790 had been acting as a downward magnet all afternoon, with the next lower support of 783-85. No news or rumor drove this selling – it just happened. There were three attempts about 1:PM for ES to breakout higher over that Key 800 level, but each failed and at 3:PM, when ES lost the 792-3 support is was clinging to (matching Dow cash 7500), the selling increased. 3:00 PM Upon reflection, perhaps a strong reason for the 3:00 PM selling was the August Consumer Credit report which came out a bit after 3:PM. Expected was $11 Billion and it came in at $4.2 Billion. This report seldom moves the market, but it's not usually off by $ 7 Billion (grin). This report would be reviewed on bearish as consumers "charged less on their credit cards or Loans". As we all know, business spending is non-existent; and this credit report confirms what so many Retailers have been saying on consumer spending (that it is down). August is back-to-school purchasing time and usually a strong month for consumer spending. 3:50 PM ES 782, YM (Dow futures) 7385, Dow cash 7403, NQ 801 (Day Lows) From 3:50 PM to their 4:15 PM close, Futures had a nice late end of day short-covering mini-rally (a mirror copy time-of-day as Friday's late end of day short-covering ). Not driven by any market news, just apparently short-covering. 4:15 PM Futures Close Prices: ES (SP Futures) 788 (6pts higher than 350pm) YM (Dow) 7440 (55 pts higher than 350pm) NQ (NDX) 814 (13 points higher than 350pm) Thoughts for Tuesday: How much of the 3pm selling was tied to the bearish Consumer Credit data? How much was out of concern for what President Bush says tonight aobut Iraq? How much was technical sell programs when ES (SP500) Futures lost 800 support? There are no market moving earnings on Tuesday, nor are there any type of economic reports. ES (SP Futures) / SPX Cash 775 level I cannot answer the above questions, but I do know everyone is watching the ES / SPX support of 775 (the July lows). Is it possible the markets have a relief rally on Tuesday depending upon what President Bush says? Charts were 'broken' once the ES 800/Dow 7500 support was lost; however they are also very oversold. NQ (NDX futures) right now (Mon 7pm) after-hours are 815, which is the 50% retracement level of today’s Low/High 800/830. ES (SP Futures) retracement of Mon's Low/High 782/809 is 795.50 DOW seems to have the largest hole to dig out of it with their larger exposure to the weak financials and retail sector. Dow Cash 50% retracement of Mon’s Low/High 7400/7635 = 7517 Current trend remains 'Down' I cannot provide any market reason for having a Green Tuesday, and the only buying continues to appear to only be Shorts covering on Profit Taking. With that said, it wouldn't take very much for an October 8th Reversal. That date has on other years proved to be a reversal date. As I type this at 7:30 PM, ES and NQ futures have leaked a little higher than their 4:15 PM close after re-opening for the overnight Globex session at 4:45 PM with ES at 792, NQ 817. Dow Futures have not yet re-opened. Tough to call for Tuesday: On the bullish side, there’s the possibility of a large short-covering rally existing; so be sure to monitor existing Shorts. On the bearish side, major chart damage was done today on losing Key Supports of ES (SP Futures) 800 and Dow 7500. I’d like to see what the President has to say at 8:00 PM tonight before forming more concrete thoughts on Tuesday. Alan Hewko ******************** INDEX TRADER SUMMARY ******************** ************************Advertisement************************* Tired of waiting on trades to execute? Does your broker offer Stop Losses on Options? Trade instantly with Stop Losses at PreferredTrade Inc. Stop Losses based on the option price or the stock price. Move your trading into the next millennium with PreferredTrade. Anything else is too slow! http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN ************************************************************** **************** WEEKLY FUND WRAP **************** Dog Days of Fall More profit warnings sank U.S. stocks for the sixth consecutive week with the S&P 500 index down 3.2% and some pro-growth stock funds losing more than 5% for the week. All of Lipper's equity fund indices lost ground, led lower by tech sector funds, which tumbled 6.6% on average for the weekly period through October 4. Developed foreign markets followed the U.S. lower with the MSCI EAFE index down 3.6% in dollar-adjusted terms last week and the average international stock fund reporting an average 3.1% loss per Lipper. European stocks finished the week 3.0% lower while Pacific stocks were 4.4% in the red for weekly period. The Yen weakened against the Euro and the U.S. dollar. The Lehman Aggregate Bond Market index ended the week down 0.1% while the average intermediate-term bond fund was 0.2% lower on the week. Credit jitters plagued the mid-grade and low-quality bond sectors with the average high yield fund dropping 1.3% for the week per Lipper. A few bond fund indices such as GNMA bond funds and international income funds generated positive results. The average taxable money market fund has a current 7-day simple yield of just 1.25% per iMoneyNet.com, roughly a half percentage point below the Fed Funds rate, a key overnight lending rate for banks and financial institutions. Lipper Equity Fund Indices The Lipper equity fund indices last week reflect the weak market environment for stocks amid concerns over corporate profits (and accountability), higher oil prices and violence/terrorism in the Middle East. The top five and bottom five Lipper equity indices for the weekly period through Friday, October 4 are shown below. Top Five Lipper Equity Fund Indices: -0.3% Emerging Markets Funds (YTD -11.6%) -1.1% Gold Funds (YTD +40.5%) -2.3% Balanced Funds (YTD -16.6%) -3.1% International Funds (YTD -19.9%) -3.1% Large Cap Core Funds (YTD -27.4%) Bottom Five Lipper Equity Fund Indices: -6.6% Technology Funds (YTD -51.4%) -5.3% Mid Cap Growth Funds (YTD -34.6%) -4.8% Small Cap Growth Funds (YTD -34.3%) -4.8% Mid Cap Core Funds (YTD -25.5%) -4.5% Mid Cap Value Funds (YTD -22.9%) You can see that U.S. large cap core funds lost 3.1% on average last week, matching the decline of the S&P 500 index. With the technology sector getting pummeled again, growth-oriented funds produced some of the week's biggest declines. Amid diversified stock funds, mid cap growth funds were the biggest losers, down 5.3% on average for the weekly period. International stock fund losses were similar to those generated by domestic large cap funds, except for emerging markets equity funds which minimized their losses for the week. Gold/precious metals funds lost 1.1% on average, but the group's largest fund, Vanguard Precious Metals (VGPMX), posted a 1.1% gain during the 5-day period. Fidelity Select Gold (FSAGX), the group's second largest fund, took the category down, losing 2.7% for the week. Partial equity (balanced) funds minimized their losses relative to full equity funds, closing the week down 2.3% on average per Lipper. Some balanced funds lost over 3% on the week depending on how the fund's fixed income assets were invested. As you'll see below, not all bond categories reported gains for the week. Lipper Fixed Income Fund Indices Lipper's weekly fixed income fund indices were mixed with global and international fixed income funds posting positive returns on average while comparable U.S. funds were generally flat to lower for the week. A weaker dollar (versus Euro) contributed to non- U.S. bond fund gains. Top Five Fixed Income Fund Indices: +0.3% International Income Funds (YTD +11.4% +0.2% Global Income Funds (YTD +6.9%) +0.1% GNMA Funds (YTD +7.2%) +0.0% General Municipal Debt Funds (YTD +8.8%) +0.0% Short Investment Grade Funds (YTD +3.1%) Bottom Five Fixed Income Fund Indices: -1.3% High Yield Funds (YTD -8.8%) -0.4% Corporate A-Rated Debt Funds (YTD +6.5%) -0.2% Intermediate Investment Grade Funds (YTD +5.7%) -0.0% High Yield Municipal Funds (YTD +5.5%) -0.0% U.S. Government Funds (YTD +8.9%) Safer categories such as short-term bond funds, GNMA funds and U.S. government bond funds were able to stave off losses while the riskier high yield fund group took another beating, losing 1.3% on average last week. Loan defaults are on the rise, not good news for corporate mid-grade or speculative grade ("junk") bond markets. Where there were positive weekly returns for general U.S. bond funds, those gains were de minimus. PIMCO Total Return (PTTRX), the Fidelity Magellan of the fixed income fund world, ended the week with a positive total return of 0.1% versus a negative 0.1% return for the total bond market as measured by the Lehman Bros. Aggregate Bond Index (using Vanguard's index fund as the proxy). As a result, some balanced funds lost as much as general equity funds did last week, with their bond portion providing no asset diversification benefit. The American Funds, Hartford Advisers, Dodge and Cox, and Fidelity were among those fund families with balanced fund losses equal to the market (S&P 500 index) on the week. Largest Mutual Funds Below are the weekly total returns for the largest mutual funds in America. You can see a number of stock fund bellwethers had weekly declines of 3.0% to 4.0%, with Fidelity's Contrafund and Growth & Income funds doing a good job of minimizing losses for the week relative to similar funds as did a few of the American Funds' offerings (e.g. EuroPacific Growth Fund). Largest Stock Funds: -3.2% Vanguard 500 Index (VFINX) YTD -29.5% -3.2% Fidelity Magellan (FMAGX) YTD -29.3% -2.8% Investment Company of America (AIVSX) YTD -22.1% -3.7% Washington Mutual Investors (AWSHX) YTD -23.2% -3.6% Growth Fund of America (AGTHX) YTD -28.6% -2.3% Fidelity Contrafund (FCNTX) YTD -12.0% -1.4% Fidelity Growth & Income (FGRIX) YTD -22.8% -1.7% EuroPacific Growth (AEPGX) YTD -20.3% -2.9% New Perspective (ANWPX) YTD -29.5% -3.4% Vanguard Windsor II (VWNFX) YTD -23.5% Largest Bond Funds: +0.1% PIMCo Total Return (PTTRX) YTD +7.4% +0.1% Vanguard GNMA (VFIIX) YTD +8.2% -0.1% Vanguard Total Bond Market (VBMFX) YTD +6.3% -0.5% Bond Fund of America (ABNDX) YTD +0.6% -0.1% Vanguard Short-Term Corporate (VFSTX) YTD +3.5% Largest Balanced Funds: -2.3% Vanguard Wellington (VWELX) YTD -13.8% -1.9% Income Fund of America (AMECX) YTD -11.8% -2.3% Fidelity Puritan (FPURX) YTD -15.1% -3.0% American Balanced (ABALX) YTD -15.1% -2.1% Fidelity Asset Manager (FASMX) YTD -15.2% Other than American Balanced Fund (ABALX), the other "balanced" fund bellwethers were in line or better than the balanced fund category, which was down 2.3% on average for the week. You can see the largest balanced funds have limited their YTD losses to 15 percent, half that of the largest stock funds in the country, Vanguard 500 Index Fund and Fidelity Magellan Fund. So they've done their job this year. Money Market Funds IMoneyNet's all-taxable money market fund average stood at 1.25% as of October 1, 2002, up two basis points or 0.02% on the week. The highest retail money fund yields belong to PayPal MMF (1.80%) and Touchstone MMF (1.76%). INVESCO Treasurers MM Reserves Fund is third with a current 7-day simple yield of 1.63%. Fidelity Cash Reserves Fund and Vanguard Prime Money Market Fund, two of the largest and best-run money market funds in the nation, have 7-day simple yields of 1.52% and 1.51%, respectively, today. Mutual Fund News About the only way to beat the stock market these days is to bet against it or on higher market volatility. The ICON Funds based in Greenwood Village, Colorado thinks so recently launching four new funds to appeal to investors in this difficult market. Last week, the Rocky Mountain News reported that Craig Callahan, ICON Funds chief investment officer foresees another decade of higher market volatility and lower market returns, following the 90's bull market. According to the article, the new ICON Covered Call Fund buys stocks and then sells "call" options against the stocks for a fee, representing option income. The $1.2 billion Gateway Fund (GATEX), which started in 1977, follows a similar strategy and offers you a sense of what you might expect in terms of reward and risk compared to traditional stock funds that don't manage portfolio risk through futures or options. In addition to taking long positions in stocks, ICON Long/Short Fund will also take short positions in equities it believes may fall in price. These funds typically buy the stocks its system or process ranks the highest and also sells the stocks that are lowest-rated, hoping to capture gains both ways. The other two new ICON funds include a bond fund and an "equity-income" fund, which will invest in convertible bonds and preferred securities. Annual expenses will range from 1.3% to 2.3% of assets, per the Rocky Mountain News article. Check back to our site Wednesday, when we'll do a fund family profile of the ICON Funds, a small fund company that has doubled its net assets over the past year in this volatile market, to nearly $1 billion today. That's it for this week's Weekly Fund Wrap. Have a great week. Steve Wagner Editor, Mutual Investor email@example.com *********************** FURTURES TRADERS CORNER *********************** Index Futures Primer By Alan Hewko I’ve tried to read as many of your emails as I could and shall do my best to answer the more basic questions regarding Index Futures. Trading Index Futures is different in many ways than trading Equity Options. This article will relate to three Futures contracts: S&P500, Dow, and NDX (Nasdaq- 100 index). Why are Futures (especially the SP500 futures) so important? With one trade, a Large-money fund perhaps with dozens or hundreds of stock positions can hedge them. With one trade, one can go long or short the entire SP500 family of stocks. With one trade, you can buy or short all 30 Dow stocks via a Dow Futures contract. If there’s good news in the semi stocks and some biotech stocks, and you feel a tech rally is coming; simply go long a NDX contract without needing to think which one stock option to buy. This is why, when there is an important market news event, SP Futures are the very first to react to it. They are very liquid volume wise, and offer an impressive degree of leverage. The entire financial world does watch, react to, and make trades based upon what happens to the SP500 futures. Equity Options can do some things much better than Futures: manage risk exposure (A Long Put can only lose the value for what you paid for it), can hedge exposure to one specific stock or sector, are useful when you wish to make an educated guess on a stock’s earnings tonight, options can sell Time-decay or Premium, interesting complex option positions such as Butterfly, Iron Condor etc can be establish based on the wide support and resistance levels of a stock or sector. However, some of the advantages with Futures are: Immediate fills, much like trading MSFT via the ISLD exchange (no more hitting the ASE Option Exchange and not getting filled on your 20 lot because they just filled a 3 lot) * Narrow spreads unlike an Option Contract * No more "playing games" with an Option Market Maker trying to get your fill inside the wide bid-ask spread. * Futures can be shorted on a down-tick, unlike Stocks. * Futures have no Premium decay based partly on the VIX. * Futures have no Time-value decay. * Unlike Options, there is no computing which is the best strike price to buy. * Futures trade 22 1/2 hours a day * Futures trade Sunday nights for those occasions there is important weekend news. Futures provide very large leverage for your cash on the table. * Futures trade during after-hours to allow a trade based on market moving news, Warns, Earnings, overseas markets, etc long after Options are closed. * Futures can be used very well to hedge an existing Index Option or stock option position. (I’ll discuss hedging options with futures later in this article) * Futures are much easier to "scalp" for quick trades vs. Option scalps. There are both "full-size" versions of these futures contracts traded via open outcry in the Chicago futures’ pits, as well as electronic E-mini versions. This article will focus on the electronic E-minis as that is what the vast majority of retail- size traders use. E-mini Contract Explanation Table Contract | Ticker | Value of a | Spread from Name | Symbol | 1 point move | Bid to Ask _____________________________________________________________ E-mini SP500 | ES02Z | $50.00 per | $12.50, each SPX point | 818.25 x 818.50 E-mini NDX 100 | NQ02Z | $20.00 per | $10.00, each NDX point | 835.5 x 836.0 E-mini Dow | YM02Z | $5.00 per | approx $20, $5 contract each Dow point | 7705 x 7709 For the balance of this article, I will use the ticker symbols ES for Emini SP500, NQ for Emini Nasdaq 100 (NDX), and YM for the Dow $5 contract. Note: NDX futures are not on the Compx, but rather the NDX 100. Futures Expiration: Options have 12 contracts for each year, one for every month. Futures have only 4 contracts for the entire year. March, June, September and December. As of Oct 2002, December is the current month. Option contracts expire the 3rd Friday of each month. Futures contracts expire the 3rd Friday in March, June, September and December; and those occurrences are commonly called "Triple Witching". In reality, the vast majority of Futures traders "roll-over" the Thursday before that 3rd Friday and begin trading the next contract. Example: Friday Dec 20th is the 3rd Friday in December; however, 99% of Futures Traders will begin trading the March 2003 contract the end of day Thursday Dec 12th. Even though DEC is the current contract, one could buy or sell a Mar 2003 SP500 contract right now; however, there would be almost no volume on them. Futures Tickers: ES02Z is the current ticker for Emini SP500. ES stands for Emini SP500, the numbers 02 is the year (2002); and Z stands for DEC month. Different quote providers may use something different: ES2Z, /ESZ2, etc. Full-size contracts: Emini SP500 and Emini NDX are 1/5 the size of a full-size pit traded contract. I do not wish to confuse you, but the full-size contracts obviously have different tickers often using the letters SP to stand for full-size SP500 contract, and the letter ND for the full-size NDX futures. SP02Z being the ticker for the FULL-size SP500 Dec contract as example. Look back above at the Emini Contract Explanation Table and real- world examples may be easier to understand. ES example (Emini SP500) Contract | Ticker | Value of a | Spread from Name | Symbol | 1 point move | Bid to Ask _____________________________________________________________ E-mini SP500 | ES02Z | $50.00 per | $12.50, each SPX point | 818.25 x 818.50 It’s 11:00 AM, you are flat and market bullish. The ES (Emini SP500) is 818.25 x 818.50; Bid Size: 289, Ask Size 274. You buy one (1) ES Long at 818.50. It’s now 90 minutes later at 12:30 PM and you were right being bullish. ES is now 826.50 x 826.75. You sell your long ES contract at 826.50 for a gain of 8.00 ES points (826.5 – 818.5 = 8). You have a gain of 8 ES points x $50 per ES point = $ 400.00 ES moves in .25 movements (or $12.50) : 818.00, 818.25, 818.50, 818.75, 819 NQ example (Emini NDX) Contract | Ticker | Value of a | Spread from Name | Symbol | 1 point move | Bid to Ask _____________________________________________________________ E-mini NDX 100 | NQ02Z | $20.00 per | $10.00, each NDX point | 835.5 x 836.0 NQ is 835.0 x 835.50. You are bearish and you short 1 contract at 835.0 (no need to wait for downtick). One hour later, you were correct being bearish: NQ is 820.50 x 821.00. You cover your short by buying 1 NQ contract at 821.0. Your gain is 14 NQ points (835-821=14). 14 NQ points x $20 for each NQ point = $280.00 NQ moves in .50 increments: 821.0, 821.50, 822.0, 822.50. YM Example (Emini Dow $ 5 contract / 1 Dow point = $ 5.00 Contract | Ticker | Value of a | Spread from Name | Symbol | 1 point move | Bid to Ask _____________________________________________________________ E-mini Dow | YM02Z | $5.00 per | approx $20, $5 contract each Dow point | 7705 x 7709 E-mini DOW $5 YM02Z $5.00 per each DOW point) the spread approx $20, 7705 x 7709. Dow Cash is 7450. YM (Dow $5 Futures) is 7430 x 7434. Note: The last several weeks, Dow Futures has usually been 10-20 points lower than Dow Cash, which is of course bearish, but so has the market been. You are bullish the Dow at this level, and decide to buy 2 contracts, not 1. Long 2 YM at 7434. Dow cash is now 7430, YM dow futures are 7414 x 7420. You realize you may be wrong and are going to stop-loss out taking your Loss. Sell 2 YM at 7414. You lost 20 YM points (7434 – 7414). 2 contracts x –20 YM points (a loss) x $ 5 per Dow point = - $200 (loss of $200). YM moves in 1.00 increments: 7421, 7422, 7423, 7424 NOTE: the YM Dow $5 by far has much lower volume than ES or NQ; which is why the YM spreads are wider. However, if you happen to catch a great YM Dow trade on one of those days it moves 200 points, that wider spread isn’t that big a deal as 200 Dow points would equal $1000 (200pts x $5). NOTE: There is also a DOW $2 contract, ticker YJ, but it's being phased out shortly and has very low volume. That’s all I plan to say about that contract. NDX Futures Not to point out the obvious, but this is the NDX 100, Nasdaq 100 and NOT the COMPX. The NDX is a Weighted index and MSFT currently represents about 14% of the NDX. Futures Exchanges: ES and NQ trade on the CME exchange in Chicago, their website is www.cme.com YM (Dow Futures) trade on the CBOT exchange in Chicago, their website is www.cbot.com Both websites above have very useful information. Quality of Fills Getting a fill on Eminis is truly as easy and fast as getting filled on MSFT stock via the ISLD exchange. Also, 99.99% of the time, a Market order is perfectly safe to use. Unlike stocks and options, which have several exchanges in which you can fill your order, Futures only have ONE exchange and the CME does not have any type of Market Makers. There are no playing games with stock or option market makers, no trying to see which stock or option exchange has the best price. Futures Premium When a Futures trader uses the term "premium" they refer to the difference between the Cash and Futures prices. Example: SPX Cash is 801.25, SP Futures are 802.50, the Premium is + 1.25. Program Buy and Sell orders are frequently pegged to the SP 500 premium as it relates to the perceived notion of the Cash market currently being overbought or oversold. On average, the SP Premium is +1.50 to – 1.50; the NDX Premium (difference of NDX Cash to NDX Futures) is usually 3-6 points; the Dow Premium is usually +/- 5 to 20 points. The last several weeks the Dow Premium has averaged – 5 to -20 most days, foretelling the bearish market tone. Futures Margins Futures are traded on margin. Your margin requirements determine how much money must be put down to buy or sell a 1 lot Emini contract. Unlike equity option margin (which is 100% Cash) for a Long Call or Long Put; Futures Margin will vary from one Futures broker to the next. Almost all futures brokers use the rule of needing 1/2 the margin for Daytrading a futures contract vs. carrying that position overnight. The highest margin needed per each ES (Emini SP500) is approx. $3,563.00 to take a position home overnight, and $1,781.00 (1/2 of $3563) to daytrade each contract. For the NQ (Emini NDX), $2250 for overnight, and $1125 to daytrade. For the YM (Dow $5), each contract has a margin requirement of $2700 per contract, and $1350 to daytrade. There are several futures brokers who have much lower margin requirements, especially for daytrading them (as they can control their risk exposure during the day). No SEC $25,000 daytrade rules Unlike stock and options which have a firm set of rules for accounts under $25,000; futures carry no such rules at all. You could have a $5,000 futures account and daytrade a futures contract with 20 roundtrip turns a day, or 30, or 100 or has many times as you wished to. Can I trade Futures with my existing stock or options broker? Usually the answer is no. Futures clear through Futures clearing firms, usually out of Chicago and not stock or option clearing firms. There are a few brokers who offer Futures in addition to their existing stock and/or options business. Futures Brokers Account Minimums Obviously they vary from broker to broker, most are in the range of $3000 to $5000 to open an account. Futures Leverage Using the YM Dow $5 as example, with the Dow at 7500, the contract value is $37,500 (5 x 7500). That is, using $1350 to buy 1 YM Dow future contract, you are controlling an asset worth $37.500 or approx. 28 to 1 leverage. Futures Commissions They will vary from broker to broker, but an average commission (including all fees) is from $8 to $10 per RoundTrip PER CONTRACT. If you are paying $9 per RoundTrip, and you Buy 3 ES Emini SPs contracts and then Sell 3 ES contracts, you would be charged $27 in commissions (3 contracts x $9 per roundturn). You sometimes may see a broker advertise that $9 roundturn as '$4.50 per side'; which means $4.50 each time you Buy OR Sell a contract. Futures Trading Times of Day When do the ES (Emini SP) and NQ (Emini NDX) Trade? (times EST) Sunday Night: They open at 6:30 PM and are open all night straight thru into Monday. Mon to Fri: It’s easy to say when they DO NOT Trade, repeat, they do NOT trade each weekday (Mon – Fri) between 4:15 PM to 4:45 PM. The close on a Friday at 4:15 PM and do not reopen until Sunday 6:30 PM. Weeknight of Mon, Tue, Wed, Thur : they close from 11:00 PM to Midnight. YM (Dow $5) Trading hours: Sunday 9:00 PM open straight through into Monday. The YM Dow contract CLOSES Monday through Friday at 5:00 PM. It reopens Monday through Thursday at 9:00 PM. In other words, it trades from Sunday 9:PM all week long, except for being closed 4 hours on Mon, Tue, Wed, Thur 5:01 PM to 9:PM. A note regarding Volume in the overnight futures sessions. Futures do have decent volume each day 4-6 PM, the volume dries up until Japan opens a bit later, then they become very low volume again until Europe opens at 3:AM. Volume then picks up again at about 7-8:AM. Don’t misunderstand me on the ES contract - you can hit the bid or ask all night long at the usual 0.25 spread, the volume is simply incredibly low. Future’s trading terms MOO Market on Open Definition: execute my buy or sell order, at market price, right at the market Opening. MOC Market at Close Definition: execute my buy or sell order, at market price, immediately at the Market’s Close. MIT Market if Touched Explanation: I’m long ES at 843 and bullish, I know 852 is a well-known level of resistance and wish to exit my trade there. I could enter "sell to close at limit 852" but it’s possible that 852 might trade a few contracts but without mine being filled. An order of "sell at MIT 852" means that at the very print of 852, I would sell (at bid) at Market price; which most likely would be 851.75 Candidly, MIT orders are not used very often; as you could just have easily put a limit order of 851.75 in the first place. OCO One Cancels the Other Explanation: I’m long ES from 810, it’s 2:PM and ES is 823. An order of "Sell ES at limit 828 OCO stop-at 818" means to either sell at 828 * OR * sell at 818 on a trailing stop – if either condition is met, the other is immediately cancelled. Some brokers will allow an order like this to be a GTC (good till cancelled); meaning it will still work in the overnights or tomorrow; other brokers only allow orders like this to work as a DAY order (meaning only good for today’s session). STOPS Almost all electronic futures brokers allow usage of STOPS. RTH Regular Trade Hours Weekdays 9:30 AM to 4:15 PM EST Globex Or the 'overnight' futures markets; 4:45 PM EST to the following morning. Using Futures as a hedge tool for an option (or stock) position Keeping this quite simple: ES (emini SPX futures) are 830, OEX cash is 420. You are bearish and buy 10 OEX 420 puts (14.30 x 15.10); putting $15,100 on the table. It’s now end of day, ES (SP futures) are 810, OEX cash 410, your puts are (17.70 x 16.30) and you decide to take them home, knowing there’s an important 830am economic number and you expect a bad number. Europe is weak, sending ES futures to 803 by 8:AM, down 7 from the close. This was your desired target for your OEX puts, and if you were able to – you would take profit on them; but cannot do so as the option market isn’t open for another 90 minutes. Surprise! The 8:30 AM Economic data is very bullish, and ES futures take off, and are 815 by 9:00 AM. It feels like a short-covering morning and by 9:29 AM, ES futures are 820, 10 points higher than the close 9:32 AM : your OEX 420 puts are now 16.10 x 16.90 You are torn whether to take $1 profit when there was almost $4 profit at the close last night..............you wait and ponder 5 min, and by the time you finally exit those puts, they are for only a 30-cent gain as the bid/ask spread just went to a buck. Same scenario: except this time, near 8:30 AM, when ES futures are trading at 803; which was your original target, you HEDGE those puts by going LONG ES futures the appropriate number of contracts. Quite simply, you don’t care WHAT happens for you have locked in your profit: If the 8:30 AM numbers are bullish – simply stay long the ES futures until you can sell the OEX puts at their open If the 8:30 AM numbers are bearish – exit the ES futures (perhaps with a 1-point loss), but it doesn’t matter as ES futures are falling, so will OEX OEX options (and stock options) carry spreads of anywhere from 30-cents to $1.00 During the trading day, when the market indices hit certain key pivot numbers, and quite frankly, no one knows what is going to happen, simply that 'this number' is a key pivot number, or key support or resistance number – it’s foolish almost to exit a winning OEX (or stock option) until you confirm the market direction and pay that 30-cent to $1 spread (and then paying it again if you wish to get back in the same option position you just exited) Example: Dow last week: at 7700. My sense was this may be a top here, but it’s possible Dow just might go back up to 7900; even though I think it’s heading to 7500. At that Dow 7700 level, you buy OEX puts (10.00 x 10.60). Hour later, Dow is down just a bit to 7650, and your puts really haven’t moved. You are no longer as sure as you were an hour ago, but rather than taking the 60-cent loss on exiting those puts, simply go Long Dow futures (or ES futures) until the picture becomes more clear... Sure enough, 30 minutes later, market starts to fall; and you exit the Long Dow (or ES) futures BUT not at a total loss per se, for you are holding OEX puts that are increasing in value during that drop. On the other hand – if you had been wrong, and the market did indeed go up through Dow 7700 and you could just feel a rally building; there’s no blind-rush panic to exit the OEX puts because you are HEDGED by the Long Dow (or ES) futures: this affords you the time to make a non-panic driven decision. Perhaps you now feel the Dow will hit the 7850 number and rollover as it’s almost 3:00 PM, and you decide to hold onto the OEX puts, and at Dow 7850, take profit on your DOW futures position; and still hold the OEX puts (or perhaps even add to them). The possibilities are endless. The important point of Hedging with Futures is INSTANT repeat INSTANT fills with extremely narrow spreads. Every Option trader has had an option position become instant death and you simply cannot exit it as the option market makers run away, or call "fast markets". That simply does not happen with Futures in the same fashion. Another occasion is Earnings: You are bearish on MSFT, and before they report earnings tonight, you buy 20 MSFT puts controlling 2000 shares of MSFT via those puts. It’s 4:08 PM, option market is closed (actually, equity options stop trading at 4:02 PM ET while some index options trade until 4:15 PM ET); and to everyone’s surprise, MSFT beats earnings and raises guidance (LOL, work with me here, this is just an example and not real life [grin]). When you realize you were 100% wrong, you could Hedge those puts by buying 2000 shares of MSFT, but that uses a great deal of capital, especially as you would need to take them home to hedge your losing puts which you cannot exit until the following morning. But instead – buy NQ futures (NDX) when you saw the MSFT earnings and news. It would probably use up 60-80% less of your capital than buying 2000 shares of stock. Futures spread of bid to ask vs. Options spread of bid to ask Average option spread bid to ask is $0.50 to $1.00 on OEX, DJX options Average option spread bid to ask on stocks, $.10 to .50 Spread on ES futures from bid to ask is $12.50 Spread on NQ futures from bid to ask is $10.00 Spread on YM Dow futures from bid to ask is approx $20 NQ (NDX futures) vs. QQQ options Once upon a time, QQQs would move 3-5 points a day (or more). Now, a one-day move of 30-50 cents (or less) is average. NDX will still move 5-20 points intraday. Also, NDX futures trade when Options do not. On the other hand, with the current situation of QQQ at 20.00, and if you think that is bottom, there is far less Risk to go Long Nov 21 Calls (as example) than buying large blocks of NQ futures; for if 20 doesn’t hold – who knows how low it could go. Futures data from your quote provider Most data providers will charge $10 per month for the CME Emini Quotes; most data providers will charge $50-60 a month for the Entire CME feed, which includes many other futures you could care less about. The $10/month CME feed includes the Emini SP and NDX contracts, and more than likely, that is all you will need. CBOT continues to offer the data-feed for the YM (Dow $5) at no cost; but not all data providers will offer the YM feed without you asking for it. Some stock brokers will offer the CME feed for free after so many trades per month. Many of the Futures brokers trade platforms include free streaming quotes; along with a Depth of the Market (similar to Level 2 for a stock). Futures "Scalping" Most often, with a Futures trade, gains of 3-5 ES points, 5-10 NQ points, YM (Dow) 35-50 points is a good goal on a 1-3 hour trade. However, there are many times during a trading day when a very quick 1 point ES "scalp" trade is possible. Example: assume your futures broker has a daytrade margin of $1,000 for an ES contract. As ES 800 as been such a large recent pivot point, by example, assume you are flat, and ES is rising from 795 and is currently 800, you wish to take 1 contract "scalp short" at 800, and park a bid at 799 and get filled within 1-3 minutes. Profit is 1 ES point, or $50 Gross Profit. Less $9 round-turn commission equals net profit of $41 or a 4% return in a few minutes. This article was by no means an attempt to be anything more than covering the very basic of Index Futures. Many emails were received asking for comments on Futures trade pivots, support and resistance areas, etc. That will have to wait for another article. Along with a brief discussion on SSF (Single Stock Futures) which are due to be released soon, supposedly Oct 25 2002. Please send questions and comments regarding this article to futures@OptionInvestor.com Alan Hewko ************************Advertisement************************* If you trade options online, then you need an online broker that: offers true direct access to each option exchange offers stop and stop loss online option orders offers contingent option orders based on the price of the option or stock offers online spread order entry for net debit or credit offers fast option executions PreferredTrade offers these online option trading features and more; call 1-888-889-9178 or click for more information. http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN ************************************************************** *********************** SWING TRADER GAME PLANS *********************** Like a first date, with your first true love. I couldn't help but have some flashbacks to my first date with the girl I now believe I should have married. Actually, we'd been out on "dates" several times before, but we were "just friends" and there were no "first date jitters involved." Heck, I've profiled a lot of trades over the years, but today was my "first time" running the index trade model. To read the rest of the Swing Trader Game Plan Click here: http://www.OptionInvestor.com/itrader/indexes/swing.asp ************************Advertisement************************* ”If you haven’t traded options online – you haven’t really traded options,” claims author Larry Spears in his new compact guide book: “7 Steps to Success – Trading Options Online”. Order today and save 25% (only $15) by clicking on PreferredTrade and clicking on the link to the book on its home page. http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN ************************************************************** ******************* FREE TRIAL READERS ******************* If you like the results you have been receiving we would welcome you as a permanent subscriber. The monthly subscription price is 39.95. The quarterly price is 99.95 which is $20 off the monthly rate. We would like to have you as a subscriber. You may subscribe at any time but your subscription will not start until your free trial is over. To subscribe you may go to our website at www.OptionInvestor.com and click on "subscribe" to use our secure credit card server or you may simply send an email to "Contact Support" with your credit card information,(number, exp date, name) or you may call us at 303-797-0200 and give us the information over the phone. You may also fax the information to: 303-797-1333 ********** DISCLAIMER ********** Please read our disclaimer at: http://www.OptionInvestor.com/page/oin/aboutus/disclaimer.html ************************************************************** ADVERTISING INFORMATION For more information on advertising in OptionInvestor Newsletter, or any Premier Investor Network newsletter please contact: Contact Support
The Option Investor Newsletter Monday 10-07-2002 Copyright 2002, All rights reserved. 2 of 2 Redistribution in any form strictly prohibited. In Section Two: Stop Loss Updates: FLIR, GM, PHM Dropped Calls: None Dropped Puts: None Play of the Day: Put - WHR Updated on the site tonight: Market Watch Market Posture ************************Advertisement************************* Tired of waiting on trades to execute? Does your broker offer Stop Losses on Options? Trade instantly with Stop Losses at PreferredTrade Inc. Stop Losses based on the option price or the stock price. Move your trading into the next millennium with PreferredTrade. Anything else is too slow! http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN ************************************************************** ***************** STOP-LOSS UPDATES ***************** FLIR - put Adjust from $35.25 down to $30.50 GM - put Adjust from $39.50 down to $37.50 PHM - put Adjust from $46.50 down to $44.50 ************* DROPPED CALLS ************* None ************ DROPPED PUTS ************ None ************************Advertisement************************* ”If you haven’t traded options online – you haven’t really traded options,” claims author Larry Spears in his new compact guide book: “7 Steps to Success – Trading Options Online”. Order today and save 25% (only $15) by clicking on PreferredTrade and clicking on the link to the book on its home page. http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN ************************************************************** ********************* PLAY OF THE DAY - PUT ********************* WHR - Whirlpool - $3.72 -1.09 (-2.14 for the week) Company Summary: Whirlpool Corporation is the world's leading manufacturer and marketer of major home appliances. Headquartered in Benton Harbor, Michigan, the company manufactures in 13 countries and markets products under 11 major brand names in more than 170 countries. (source: company release) Most Recent Write-up: Whirlpool gave in with the broader markets today, losing $1.09 on the day. In spite of the unemployment rate showing improvement, the non-farm payroll number was actually lower, indicating that the employment picture, although better than originally expected in August, is still deteriorating. This does not bode well for large consumer purchases, such as stoves and refrigerators. Investors agreed, sending Whirlpool down through two significant levels on the point and figure chart. The break through $44 created a new sell signal, and the trade of $43 added another "O" to the breakdown. The stock did bounce from its low of $42.64, but this does not appear to be a significant technical level, with the next obvious support at $40. After three straight days of significant losses for the company, as well as a technical breakdown, some bounce can be expected. The key is how high the bounce might be for possible new entries. I would look for a failure below $45 as a signal that new resistance is in place. One other concern is the Dow holding its 7500 level once again. If this support level remains in place, we may see a slowing of the recent downtrend, and be forced to reconsider shorts. New entries should look for failure below $45 if we get a broad market bounce on Monday. If the Dow continues its downward momentum, then look for a break below $42.50 to initiate short positions. Lower stops to $46.50, just above Thursday's high. Why This Is Our Play of the Day: Now that Whirlpool has broken down through previous support, there appears to be little to stop its fall between now and October 16, when it releases earnings. While it looks a little extended, it closed near its lows of the day, indicating there is not much interest on the bullish side. A look at the intraday chart shows that the stock made an effort to rebound back above $42.50, but was turned back solidly at that level. The fact that it was then unable to hold $42.00 is an additional sign of weakness. The stock found buyers at $41.50 today, which gives us two good action points. The mid-dollar support level usually does not hold up, so look for either a break below $41.50, or a failed rebound at $42.50, to initiate new short positions. If the stock is able to break back above the $42.50 level, then we will wait for a failure at $44, which was the PnF breakdown point. BUY PUT OCT-45 WHR-VI OI=250 at $4.00 SL=2.00 BUY PUT NOV-45*WHR-WI OI=256 at $5.20 SL=2.60 Average Daily Volume = 703 K ************************Advertisement************************* If you trade options online, then you need an online broker that: offers true direct access to each option exchange offers stop and stop loss online option orders offers contingent option orders based on the price of the option or stock offers online spread order entry for net debit or credit offers fast option executions PreferredTrade offers these online option trading features and more; call 1-888-889-9178 or click for more information. http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN ************************************************************** ************** MARKET POSTURE ************** Major Break in Support To Read The Rest of The OptionInvestor.com Market Watch Click Here http://www.OptionInvestor.com/marketposture/100702.asp ************ MARKET WATCH ************ Support Vanishing Quickly To Read The Rest of The OptionInvestor.com Market Watch Click Here http://members.OptionInvestor.com/watchlist/100702.asp ******************* FREE TRIAL READERS ******************* If you like the results you have been receiving we would welcome you as a permanent subscriber. The monthly subscription price is 39.95. The quarterly price is 99.95 which is $20 off the monthly rate. We would like to have you as a subscriber. You may subscribe at any time but your subscription will not start until your free trial is over. To subscribe you may go to our website at www.OptionInvestor.com and click on "subscribe" to use our secure credit card server or you may simply send an email to "Contact Support" with your credit card information,(number, exp date, name) or you may call us at 303-797-0200 and give us the information over the phone. You may also fax the information to: 303-797-1333 ********** DISCLAIMER ********** Please read our disclaimer at: http://www.OptionInvestor.com/page/oin/aboutus/disclaimer.html ************************************************************** ADVERTISING INFORMATION For more information on advertising in OptionInvestor Newsletter, or any Premier Investor Network newsletter please contact: Contact Support
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