Options Trading News

January 26, 2009  Mon 8:25 AM CT


Kick the Tires and Light the Fires in CAT

Following bearish options activity that we reported earlier, Caterpillar posts fourth-quarter profit of $661 million, or $1.08 per share, compared to $975 million or $1.50 per share in the prior year period. That's about $0.23 EPS under Wall Street estimates.

I am covering half of my position in the puts by purchasing stock. If CAT bounces, we may make money on our stock hedge and on the puts. Other than waking up and having my kids hug me, this is about as good as it gets!

Barclays Pops After Declining Government Funds

Barclays is trading up by 55 percent in the pre-market after BCS says it will not need government money because "record revenue" would cover writedowns. The report triggered a rally throughout the banking sector in the United Kingdom and could boost U.S. financial stocks as well. We show Lloyds and RBS moving higher as well, while HBC is up at least $1.60.

McDonald's Down $1.50 on Earnings Report

MCD says it earned $985.3 million, or 87 cents a share, down from $1.27 billion, or $1.06 a share in the year-ago period, which included a 2007 bonus of $0.33 a share for tax items. I show shares trading $56.65 in the pre on Depth Charge after a $58.02 close Friday.

Gold Moves Higher, GFI Runs With It

Gold Fields closed at $9.67 and is trading at $10.11 in the pre-market on the Heat Seeker. Gold is higher by $7 and back through $905 in the electronic session.

Disclosures: I have positions in CAT.

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Market Level Making You Nervous, Huh? Part 3

In last week's article, we discussed how important the extra cash you save by using the Stock Replacement Strategy over buying the actual stock is! That extra cash in our account instead of being unnecessarily tied up in a stock position allows us to buy the puts we would need to protect our downside in the case of a major sell-off.

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