Schaeffer's Trading Floor Blog

Oil Creeps Higher

by 7/5/2005 3:50 PM
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Crude oil continued its trek higher this afternoon to finish the session with a 1.4-percent gain at $59.59 a barrel. This close was down from the contract's intraday high of $60.10 a barrel. Traders are keeping a close watch on Tropical Storms Cindy and Dennis in the Gulf of Mexico for potential disruptions to oil and gas production. Oil-related stock put in a solid session. The PHLX Oil Services Sector Index (OSX) has jumped 3.24 percent and the CBOE Oil Index (OIX) is up 1.97 percent. Both indices tagged new all-time highs today in trading.


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It has been a rocky couple of weeks for the airline industry…Rising crude oil prices have put a squeeze on margins and the AMEX Airline Industry has been in a steady decline since early June, as shown in the chart below.

Northwest Airlines has been steadily weakening with the rest of the airlines, and this feeble price action is bringing out the bears in the options crowd. On Friday, puts traded briskly on NWAC, as put volume was 2.4 times heavier than average. A closer look into the activity reveals that nearly 5,000 put contracts translated into new open interest today at the September 2.50 strike (NAQ UZ).

Digging even deeper into this option activity shows that a block of 5,000 contracts went off at the ask at 11:03 a.m. on Friday, suggesting that the contracts were purchased. There are now more than 6,000 contracts of put open interest at the September 2.50 strike, while the September 5.00 put is home to nearly 18,000 contracts of open interest.

With NWAC trading at $4.17 today, it should be interesting to see if these skeptical option speculators are accurate before these options expire in September.<


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The January 80 call on Harrah's Entertainment (HET: scorecard, quote, chart) are briskly trading in Tuesday's trading. Over 10,000 contracts have changed hands with two institutional-sized blocks being traded around noon. Two blocks of 3,474 and 6,176 contracts hit the trading wire at 12:25 and 12:26 EST, respectively. These appear to be purchases, as the trades went near the ask. Interestingly, this option only had 76 contracts in open interest heading into Tuesday's trading. There is no news in HET to account for today's unusual option activity.

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It Must Be Tuesday

by 7/5/2005 2:42 PM
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Well it's Tuesday and that means Todd Salamone, our V.P. of Research, will be on CNBC this afternoon in a bull/bear debate. Please tune in a little after 3:00 p.m. to see what he has to say.

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Amazon.com is trading higher by over four percent today, thanks to an upgrade from Legg Mason. The analyst raised their rating from a "hold" to a "buy". AMZN has been locked between $32.50 and $36.50 for the past five months. The sentiment picture for AMZN represents quite a mixed reading. Option traders are showing extreme optimism with a SOIR reading of 0.58, this is lower than 99 percent of the readings for the past year. The short sellers and the analyst ratings are showing extreme pessimism. The short interest ratio is at 7.32. According to Zacks, there are four "buy" ratings, eight "hold" ratings, and three "sell" ratings.

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