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Wednesday, October 18, 2006

Options Lesson

Random lesson from the options market. See these block trades:



My first reaction was go long Goldman Sachs, ton of blocks for ITM calls expiring in 2 days!!!! Then I remembered it was options expiry week. Here is how the scenario plays out, customer calls MM and buys GS Calls, MM sells calls to customer (short calls) and buys stock to hedge position. Since it is near expiry, customer then closes option positions by selling calls back to MM, MM now flat option position and sells hedged stock. Partially the reason GS is down .95 right now.

Keep in mind we've had quite a run and this same process could be happening in a few stocks. Remember the turnaround noon yesterday. This selling could only be temporary. Or maybe someone actually thinks a crazy guy in N. Korea with nuclear weapons might be bad for our market.....

The Importance of Market Internals

Dow 12,000!! Dow 12,000!!! Had you been monitoring the TICK, TRIN, or AD Line you would have seen the divergence before the retracement, it will be interesting to see how the day ends, if the record high was a bull trap by the bears or the bulls can really take charge.

Monday, October 16, 2006

THE ONLY GOOD THING ABOUT CNBC



Rick Santili is the man too but I figure you;d rather see a pic of her.

Change in Listing Stocks

Hopefully you've checked up on HLSH (+5.9%) and DPHIQ (+35%). Here are some other interesting names that have recently changed or announced a change in listing from OTC to either NYSE or AMEX:

XPL, BNV, GBE, KAD, H, WYN

Tuesday, October 10, 2006

Bullish Fodder

Here's a chart from TickerSense showing that sentiment on the Nasdaq is still net bearish, when everyone is on one side of the trade, it tends to be an excellent contrarian indicator.

Monday, October 02, 2006

Contrarian Auto Part Maker Play

There has been plenty in the news regarding General Motors, Ford, and the state of US automakers. Along with Citizen Kane, these guys have seen better days. Though had you purchased shares of GM or F at the bottom, you'd be sitting on a tidy little profit, see Captain Kirk. Over the weekend there was a report that Appaloosa Management is looking to INCREASE their current position into troubled autoparts manufacturer Delphi from 9.3% stake to 33%. OK, so these guys lost $3.7 Billion in 8 months (I guess their no Amaranth!) but they also pulled in $11.86 Billion in revenue for '06. Delphi provides auto parts mainly for General Motors, which seems to have turned the corner, and in the past has been highly correlated to their performance (R = .87). Keep in mind, these guys are on the pink sheets and still have relatively high default risk. The '09 6.5% bonds traded higher today on the news though, and potentially another way to play this name-remember equity holders are last in line to the assets.