Tuesday’s total option volume of 18.1 million contracts resulted in net open interest growth of 1.64 million calls and 2.56 million puts. Bank of America Corporation (BAC), Caterpillar Inc (CAT), Microsoft Corp (MSFT) and Cisco Systems Inc (CSCO) saw the greatest growth. Top five new positions opened include 64k Bank of America Corporation (BAC) Jun-13 14 calls, 43k Bank of America Corporation (BAC) Jun-13 13 calls, 24k Yahoo Inc (YHOO) Jan-14 30 calls, 21k Intel Corporation (INTC) Jan-14 25 puts and 21k Caterpillar Inc (CAT) May-13 90 calls.
Once again, the transports outperformed, the small and mid-cap stocks outpaced their larger counterparts, cyclical sectors assumed a leadership position, and Treasuries were weak. The Dow Jones Industrial Average closed above 15,000 for the first time ever and the S&P 500 once again notched another record closing high of its own. Foreign markets have moved up once again, with most major indices registering modest gains on the back of China’s stronger-than-expected trade report (the legitimacy of which some are questioning) and Germany’s stronger-than-expected industrial production report. The stock market is showing tremendous strength. The Delta Market Sentiment indicator is at 60% and climbing.
If you are nervous about a potential market pull-back, you can replace stocks in your portfolio with long call options. This stock replacement program will limit loss to the premium paid if there is a pull back but allows you to continue to participate if the market shows additional strength.