Tuesday’s Options Alerts…

  • December 10, 2001
  • TradingMarkets Editors

Stocks fell today ahead of tomorrow’s Fed meeting.
Weakness was across the board as just about every sector ended in the red. Both
the Dow
(
$INDU |
Quote |
Chart |
News |
PowerRating) and Nasdaq
(
$COMPQ |
Quote |
Chart |
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PowerRating) ended below their psychological
levels of 10,000 and 2,000, respectively. Investors are hoping for another 25
basis point rate cut. If that happens, this would be the 11th rate cut of the
year and it would take the Fed funds rate to a 40-year low. The VIX
(
$VIX.X |
Quote |
Chart |
News |
PowerRating) opened
and closed in the upper half of its range. This intra-day shift in sentiment
suggests that fear is increasing. No CVR signals were
triggered today. The VXN
(
$VXN.X |
Quote |
Chart |
News |
PowerRating) opened in the upper half of its range and closed
near the highs of the day. This intra-day shift in sentiment is also telling us that fear is
increasing.
The VXN did not trigger any CVR signals either. Both volatility indices moved
higher today ahead of the Fed meeting. Coming into this week, the VIX was in
somewhat dangerously low levels, thus signaling a top was near. Take caution, as
we really have mixed economic signals going into tomorrow.

Points of Significance:

Visionics
(
VSNX |
Quote |
Chart |
News |
PowerRating) rocketed over 42%
higher on over six times its average trading volume today after the company announced
that it has teamed up with Aerospace giant Raytheon
(
RTN |
Quote |
Chart |
News |
PowerRating) to develop
and sell facial recognition technologies that will be used by airports as well
as government and commercial entities. Visionics’ options traded almost seven
times their average contract volume. Protein Design Labs
(
PDLI |
Quote |
Chart |
News |
PowerRating) shed 19% today
on almost 10 times its average trading volume. The company reported that in a
Phase II clinical trial, their experimental drug for non-Hodgkin’s lymphoma
did not notably stop the progression of the cancer. PDLI did find support at its
50% retracement level from the September 24 low. Shares of independent energy
producer Calpine
(
CPN |
Quote |
Chart |
News |
PowerRating) fell over 16% on over six times its average trading
volume today. A New York Times article that compared Enron
(
ENE |
Quote |
Chart |
News |
PowerRating) to Calpine made investors nervous. Calpine’s implied volatility has gone to a new high. Its
options traded over five times its average contract volume. There is very heavy
activity in the December 17.50 and December 20 calls as well as the January
17.50 and 20 calls.

Volatility
Index		 Close Net
Change		 Signals/Direction %
Above/Below 10 Day Moving Average		 Significance
VIX 26 UP 1.11 NONE 0.01 % Above Not At Extreme
VXN 52.12 UP
1.94		 NONE 5.36
% Above		 Not At Extreme

Abnormal Options Volume With Price Movement

– Abnormal options volume (calls and puts) with stock price movement

Name Symbol Net
% Change		 Volume Avg.
Volume
Visionics VSNX + 42.47 2525 362
Protein Design Labs PDLI – 18.99 10709 2768
Calpine CPN – 16.75 58506 10116
Halliburton HAL + 16.66 31617 7671
Identix, Inc. IDNX + 14.36 923 189
Reliant Resources RRI – 12.70 539 102

Stocks With Biggest Spikes in Implied
Volatility – Stocks with biggest increases or decreases in implied
volatility compared to previous day.

Spike Up

Name Symbol IV Previous
IV		 High
IV		 Low
IV
Calpine CPN 111.4 74.9 78.9 53.3
Sherwin-Williams SHW 40.5 30.8 37.5 25.7
Viacom (Class A) VIA 53.9 42.4 62.3 32.3
Family Dollar Stores FDO 37.9 30.5 53.2 29.7
Sealed Air SEE 60.0 49.4 40.3 38.1
Remec REMC 73.1 60.2 81.8 58.9

Spike Down

Name Symbol IV Previous
IV		 High
IV		 Low
IV
Progress Energy PGN 18.6 28.1 26.7 17.9
ServiceMaster SVM 19 26.7 37.7 21.5
Fleetwood
Enterprises		 FLE 69.55 86.8 77.8 42.2
Energy East
Corporation		 EAS 26.7 32.3 33.3 25.4
Telefonos de
Chile		 CTC 33.4 40.3 50.4 26.2
Mutual Risk
Management		 MM 57.9 66.7 104.9 61.6

Please use stops on every trade!