Play of the Day - Put, Sunday, 07/21/2002
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UPS - United Parcel Service $67.00 (+5.74 last week)
Company Summary:
United Parcel Service is an express carrier package delivery company and a global provider of specialized transportation and logistics services. The company delivers packages each business day for 1.8 million customers to six million consignees. In 2001, UPS delivered an average of more than 13.5 million pieces per day worldwide. The company's primary business is the time-definite delivery of packages and documents throughout the United States and in over 200 other countries and territories. UPS has established a vast global transportation infrastructure and developed a comprehensive portfolio of guaranteed delivery services and supports them with advanced technology.
Play Description:
The Americanization of the S&P500 finally reached completion on Friday, just one more factor adding to the volatility of a wild expiration Friday. All of the companies being added to the index saw heavy buying at the close, as funds were loathe to take on those positions any earlier due to the wild carnage in the broad markets. Shares of UPS had actually traded well for much of the week already, having moved up from the $0 level to just over $62 on Thursday. But the volatility became rather insane on Friday, with the stock trading in a widening pattern between $61.50-64.00. And that was before the huge surge in volume (more than 20 million shares) after the closing bell that traded at $67. With the broad market clearly in trouble and likely headed substantially lower next week, it seems a pretty safe conclusion that UPS will lose a lot of the luster it had going into Friday's close. We want to take advantage of the artificial surge to initiate new positions that will benefit as the stock falls back to earth. Given the large move after the close, technical levels are rather hard to gauge right here. Although it is worth noting that $67 is the site of resistance from April 2000, so it could very possibly be where the reversal occurs. Above there, we have heavy resistance at $70, so we'll set our stop slightly higher at $70.25. Of course, if the after hours action is irrelevant (like it often is), we could see the stock roll over at the $64 resistance level, and that would also provide for a solid entry into the play. After we see where the stock settles out on Monday, we'll be able better define the action plan and set a better level for our stop.
BUY PUT AUG-65*UPS-TM OI= 686 at $2.75 SL=1.25
BUY PUT AUG-60 UPS-TL OI=3499 at $0.90 SL=0.50
Average Daily Volume = 3.31 mln |
