An Ungamable Situation

The market's key variable -- the CPI -- remains an unknown, so the trader's laying low.

Author:: Jim Cramer
Publish date:: Oct 18, 1999 10:50 AM EDT

How perfectly hard is this game? Let's take a look at a textbook example of what makes this market so tough. Tomorrow's

Consumer Price Index

is obviously one of the most important numbers to come down the pike in some time. If we get a good number, we might even reverse the selling from last Friday's

PPI

Cramer's latest: Tell us what you think on

TSC

Message Boards.

But if we get a bad number, you can take my

Dow Jones

10,000 hat and sell it on

eBay

(EBAY) - Get Report

as a real collector's item, like a "Dewey Defeats Truman"

Chicago Daily Tribune

edition.

So, with that in mind, we considered in our morning meeting an investment in

American Express

(AXP) - Get Report

calls. This stock got the stuffing knocked out of it last week. It could vault right back with the right CPI. It is a Dow stock that has outsized volatility, to say the least.

I told my partner,

Jeff Berkowitz

, that we should look at and price out the November 140 calls with the stock at 137. Sure enough, the call is priced at 6.5! That is extreme. It says that the market makers fear this upside and don't want to play. So they make that call unattractive. I think if you buy that call you will lose money.

So why not sell the call? Because you could have your head handed to you on the right CPI number.

In other words, we are in ungamable territory. We have the key variable, the CPI, as an unknown.

Bottom line: We feel we have no edge here. We play it small. We add on weakness and sell on strength. And we build our drug positions.

James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund had no positions in any stocks mentioned. His fund often buys and sells securities that are the subject of his columns, both before and after the columns are published, and the positions that his fund takes may change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to comment on his column at

jjcletters@thestreet.com.