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Buzz Bits: Dow, Nasdaq Finish in Green


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Editor's Note: This is a small sample of the content available on the Buzz and Banter.

Mailbag! - Jeff Macke - 1:03 PM

Minyan Kneel! writes:

"Why isn't anyone talking about the mark-downs when discussing retail sales? I'm freaking sick of hearing how great the results have been when the stores seem to be giving stuff away at no profit."

I get the sense that everyone is looking to retail for something to tell us about the state of the economy or the consumer. As a guy who writes about retail and trades the stocks quite a bit, I'd love to be able to help tease the Big Picture Lessons out of the data we have thus far. Truthfully, I just don't think that dog will hunt. The holiday season is coming in more or less in line with the trends of the last few years. That means: emphasis on gift cards, heavy price promotion and an uncomfortable reliance on weather trends.

While there has been a decent amount of "Door Buster" pricing, especially in electronics (where Wal-Mart (WMT) and others sold limited product below cost), this is always the case. If you're looking for a sign of dying consumers or, for that matter, Goldilocksian spending, you won't find it in the mall.

Generalities for dev-stage biotech options... - David Miller - 11:57 AM

  • Never be long calls that are just out of the money or barely in the money. The mechanics of this sub-sector make these calls almost certain to expire worthless.
  • Any time there are more than 1000 contracts outstanding at any near-the-money strike, the price is almost certain to dip below that strike at expiration.
  • By the time biotech non-specialists learn of a binary event, the premiums are usually too large to put on effective spread trades.
  • Adam's point about volatility into known binary events and selling options is an excellent one. Options sales are a useful source of income during the "dead times" between a company's binary events as long as you remember they are not a hedge against anything.
  • Biotech is currently unsettled because of high acquisition activity. An increased likelihood of an acquisition must be factored into your risk/reward when selling options. Selling naked calls at this point of the cycle is very dangerous.
  • Timelines are always delayed. Buy as many months after when you expect the event to occur as you can afford to make sure the event happens before your position expires.

New Home Sales - Kevin Depew - 11:20 AM

This morning New Home Sales from the Commerce Department showed inventory of new homes had dropped to its lowest level since May. But, as Minyan Scott just pinged me to point out, inventory can be deceiving as homes that are having trouble selling come off the market to be rented.

Moreover, as we noted following last month's report, pricing of new home sales is nearly impossible to figure as builders may include a huge range of incentives to move the home that do not go into the final reported price figure.

Meanwhile, regardless of how the reality may unfold, the market interprets the news positively for homebuilding stocks. The PHLX Housing Index (HGX) has begun a new DeMark TD-Sequential (learn more about TD-Sequential here) sell countdown, which means we have most likely not yet seen the peak of this counter-trend trading move from the July lows.

What you need to know... - Jon Doctor J Najarian - 8:10 AM

President Gerald Ford Passes Away – The 38th President, a Michigan graduate and football player, as well as Yale University Law School graduate passed away last night just before midnight. Tradition dictates that the stock market will close sometime in the next week to observe his passing.

Toyota (TM) & Ford (F) Held Preliminary Talks – The chairmen of Toyota and Ford met last week but they did not discuss the possibility of forming any alliance. And if you believe that, I've got a set of solid gold 24 inch spinners to sell you!

Will Gift Cards Save Christmas? The next few weeks will tell the story, as the National Retail Federation projects $24.8 billion, a 34% increase over 2005. While that's only 20% of total gift giving, the manor in which the revenue is booked (when the cards are redeemed) makes tracking the totals very interesting.

FL Group Takes 6% Stake in AMR - Iceland's FL Group announced it has bought a 5.98 percent stake in AMR. The purchase makes FL the third-largest shareholder in the parent of American Airlines. FL says they spent roughly $400 million accumulating shares.

Position in AMR

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