Strategy for February 1, 2002
Tough week on wall street. The markets spent the week trying to figure out its direction. Economic news and the Fed reported some good news. The Fed appears to be through cutting (for now, as expected) and unemployment was down (a surprise) and good news on the GDP front. Still, the market was rumor driven early in the week where fears of "accounting irregularities and Asbestos concerns" seemed to infect several stocks. Later, the market spent 2 days recovering (nicely) and a relatively quiet day today.

Option volatility climbed significantly after coming off some very low areas early and that provided for opportunity to put on some 1:1 call spreads at very attractive prices. Our candidates for this strategy had to fit 2 major tests beside being fundamentally attractive. The positions need to withstand a 30% downside move in the underlying security and have a return (before commisiion and taxes) of 30-70%. Stocks like AOL, TXN, JPM, TYC, SLB, GE seemed to fit this bill for us.

Happy trading and stay tuned... we will be sharing more regularly!