After spending the morning in positive territory, the market faded yesterday as oil climbed to a new high of $144 a barrel on supply concerns and the tension brewing in the Middle East. News that Israel or the United States could possibly attack Iran had the market walking on eggshells. Iran is the world’s 4th biggest oil producer and is OPEC’s 2nd largest exporter. Turmoil in the Middle East is always a market mover and yesterday was no different.

Also weighing on the market was General Motors (GM, $9.98, down $1.77). On Monday I said there was a good chance GM falls below $10 and that has now happened. After a brief scare, the July 10 puts (GMSB, $1.10, up $0.72) exploded for a 190% gain yesterday. These puts have nearly doubled so protect your positions accordingly.

Merrill Lynch (MER, $31.15, down $1.10) dropped another 40 cents after yesterday’s blog update and the July 32.50 puts (MERSA, $2.86, up $0.61) are up 33% from an entry price of $2.15.

The FedEx (FDX, $74.70, down $1.67) July 80 puts (FDXSP, $5.60, up $1.00) are up 250% from an entry price of $1.59. Some of you may have set stops in the $4.50 range but raise it up to $5.00-$5.25 if you are still in the position.

Another stock on the verge of a MAJOR breakdown is Chipotle Mexican Grill (CMG, $80.05, down $1.60). The stock is no stranger to the blog as I have covered it numerous times in the past. It’s a stock that I have felt has been way overvalued for quite some time even when the market was doing well. However, Chipotle lost $7 on Monday and hit a low of $79 on Tuesday. From where I sit, it looks like this one could fall to the low $70’s. The company reports earnings on July 23. The July 75 puts (CMGSO, $1.65, up $0.20) have already tripled since Monday but they may have more room to run. If they are still under the $2.00 level after the market opens, they may be good for a quick trade up to $3.00 if Chipotle continues lower. The options expire before Chipotle announces earnings so we shouldn’t get much upside volatility with the stock in a downtrend.

And finally, I mentioned the Nokia (NOK, $23.67, down $0.54) July 20 puts (NAYSD, $0.20, unchanged) which are 15% out-of-the-money based on the stock price. They may still be a reach but the July 22.50 puts (NAYSX, $0.70, up $0.15) were up 27%.

Futures are pointing towards a higher opening this morning despite a weak payroll and unemployment report. The market is closing at 1:00PM EST today and will be closed for July 4.

Rick Rouse
Rick@OptionsMentoring.com