Brand New Quarter, Same Old Script

I feel like I can cut and paste these opening posts. Higher oil and a weaker dollar are conspiring, and stocks are poised to open lower. But today, the levels of each are getting my droopy eyes open. I don't drink coffee, so this a good thing in that I save myself a few bucks getting out of bed.

I'm not sure if we are seeing white of their eyes, but I'm getting an itchy trigger finger to start scaling into some bullish positions. Maybe use a barbell approach of buying some large-cap tech such as Hewlett Packard (HPQ - commentary - Cramer's Take) coupled with health care such as Humana (HUM - commentary - Cramer's Take) and UnitedHealth (UNH - commentary - Cramer's Take). In the latter, so much bad news and the possibility of a Democrat coming into the White House seems built into the stock prices.

On the options front, Lehman Brothers (LEH - commentary - Cramer's Take) -- oh, brother -- is sure to top the most-active option list. Rumors started late yesterday that the firm was for sale, and the shares hit multiyear lows. This morning, the company is insisting it is not in such dire straights and will remain independent. This statement is being taken at face value, and the stock is poised to open higher, all the way above $20 a share.

But the options market is taking a less blasé view. The implied volatility of the July options is crossing the 200 level. In dollar terms, that means the July $10 puts are trading about 50 cents, meaning even if the stock get cut in half in the next 16 days, you can still make move by selling these puts and collecting the premium.

I've been there and done that. And I was wiped out. So while I hate buying pumped-up premium, if I thought LEH was in better shape than is being portrayed, I'd buy a call spread, maybe go out to the September or October series. But I won't be doing that.

The one idea I might act on if oil crosses above $145 is a short for a quick trade. I'd use the U.S. Oil and Gas Fund (USO - commentary - Cramer's Take) ETF as the vehicle of choice. Again, this would be a short-term trade with expectations that we can see a pullback to around $140 a barrel.

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Steven Smith writes regularly for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. He was a seatholding member of the Chicago Board of Trade (CBOT) and the Chicago Board Options Exchange (CBOE) from May 1989 to August 1995. During that six-year period, he traded multiple markets for his own personal account and acted as an executing broker for third-party accounts. He appreciates your feedback; click here to send him an email.

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