Cleaning Up with Clorox (CLX)
by Houghton and Atkeson 09/04/08
Option investors are buying the Clorox (CLX) Sept 65 Calls (CLXIM) and Oct 65 Calls (CLXJM) about 9,000 times today so far.
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What is impressive about this activity is:
1. Today's activity is not far off from matching the total of all open calls in all strikes and expirations for CLX and
2. The bulk of today's activity is in the September expiration, leaving only a couple of weeks for CLX to appreciate from about $62 to well above $65.
Since the July 15 market bottom, CLX has moved $10 off its low of $52 per share and is showing few signs of slowing down.
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Looking into June, the market should begin refocusing on upcoming earnings reports for evidence the economy is gaining momentum.
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In the short-term, the government's bond auction is likely to be a key driver of stocks.
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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.
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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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