Before You Eat Your CAKE, Consider Some Sweet and Sour Pork
by Houghton and Atkeson 10/21/08
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Side by side with CAKE, option investors are buying the P.F. Chang's China Bistro (PFCB) Nov 20 (HUOWD), 17.50 (HUOWW) and 15 (HUOWC) put contracts.
With PFCB at $17.75, this front-month options buying appears aggressive and directional.
PFCB is scheduled to report earnings on Oct. 22. Clearly, option investors believe consumers would rather eat at home than go to the Cheesecake Factory or P.F. Chang's.
More By This Expert
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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