Sunday, September 9, 2007

Options Screener

I was somewhat reluctant to show this screener this evening.

Why? It shows a number of very bearish plays on both the SPY and SPX puts all the way down to the 1305 strike. The problem here for me, imho (and this isn't advice to buy or sell), is being naked long a put way down at 1305 means the S&P will have to fall a gargantuan 150 points. A drop like that wouldn't completely surprise me given the extent of the trouble in the banking system, but a big and obvious risk in those far out of the money puts is that time is against you, that you are betting the banking behemoths (the establishment) loses control and that you are betting against the Fed's bully pulpit.

While it seems as if the previous ecstatic utterances by Bernanke are falling on deafer ears, he still has tools left to work with which can cause gains in those puts to quickly evaporate. There's also a pretty good chance a good chunk of the put activity in the S&P index puts is also tied to hedging of long portfolios. So it's useful to note the activity in the S&P put-world, but they're really lottery tickets, or worst case hedges down at those levels.

I personally favor long commodity futures plays in crude, gold and in the grains and longer term shorting plays in the financials, homebuilders, etc (still not too late as the knives continue to fall) and increasingly I am looking at names in the consumer-discretionary category to pop up on the options screener as short candidates.

The inflation pace is sure to pick up with the dollar heading south and this will keep the grains and crude fairly well supported. Can you say stag-flation?? Remember, a rise in crude, or wax beans, or turpentine does not cause inflation. Inflation is caused by too much money in the system chasing after goods which then rise in price - Eco 101. Anyone who tells you the inverse is likely a bubble vision cracky-lackey and should own just a mason jar to bank coin

More Options Screener commentary: (Remember the options screener is for educational purposes. Names listed below are not intended to be investment advice to buy or sell. You must do your own due diligence.)

MTG puts were active Friday... really, what's not to hate with that stock?

Hong Kong iShares (EWH) ... all time high just a few days ago.. a case of the bigger they are the harder they fall?

Southwest Airlines (LUV)... someone apparently giving themselves some time with a December 12.5 put strike. What would be among the items cut first at businesses in an economic downturn? Or maybe it's just the Hooter's waitress buying those puts as revenge?

WCI Communities (WCI) now that Icahn has pulled the company off the market, someone thinks it has farther south to go. It has traded to into the 6s recently.

Toll Brothers (TOL) - homebuilders like TOL and Hovnanian (HOV), etc are sporting high volatilities with more major, major impairment charges expected as real estate markets remain, in homebuilders' words, "challenging".

Cnooc (CEO) popped up on the CALL side of the screener with huge volume. But it's a false alarm. CEO goes ex-dividend on Monday, so it was the usual market maker to market maker dividend capture game. CEO is in the midst of a double top formation battle and could be vulnerable to a downturn if the white-hot Chinese market were to slip and dip, but it's still an interesting company. Oil and China in the same breath are a bullish long term proposition.

No other comment about the call side of the equation as the XLF and MDY trades involved largely spread strategies and the SPX October 1350 calls largely hit the bid Friday, actually a bearish speculation on apparent call selling.

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