Simpson Manufacturing (SSD) Coming Unhinged?
by Houghton and Atkeson 12/18/08
Simpson Manufacturing (SSD) makes fasteners, connectors and venting systems. The stock is trading flat on the year. It is up about $7 from its lows reached in late October.
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Option investors are betting the jig is up. With SSD trading at about $27, they are buying an SSD March 25-15 Put spread (SSDOE/SSDOC) about 2,500 times.
This volume is about 50 times normal.
The company is expected to report earnings on Feb. 2, which will fall within the March expiration. If these option investors are proven right, the stock is likely to find new lows in the coming months.
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Looking into June, the market should begin refocusing on upcoming earnings reports for evidence the economy is gaining momentum.
Watching the Treasury's Actions
In the short-term, the government's bond auction is likely to be a key driver of stocks.
Treasury Auction Boosts Market
The Treasury's auction of two-year notes brought an upside surprise which should alleviate fears of a lack of demand for U.S. paper.
Credit Markets Point to Upturn
The credit market, a reliable indicator of equity direction, suggests we will break out of the SPX's trading range to the upside.
The market seems to be saying that a 30% move up from the lows is ahead of the real economy and the market needs to allow the economy to catch up.
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