Friday’s Options Alerts
It was all about the
offense today as investors scrambled to put their best foot forward
after two surprising economic reports supported the broader market averages for
a solid trend day higher, while leaving the “defense” to sit this one out. Retail
Sales figures and Initial Claims spurred the market
higher, further prodded by Intel’s
(
INTC |
Quote |
Chart |
News |
PowerRating) increased buyback program, and
IBM’s affirmation of being comfortable with analysts’ estimates on Big
Blue.
As mentioned, the whole team didn’t get to
participate in today’s spoils. The Defense/Aerospace sector was in need of a
good defense of its own, as it was under considerable pressure the entire day.
Individual issues of note include
(
NOC |
Quote |
Chart |
News |
PowerRating),
(
GD |
Quote |
Chart |
News |
PowerRating),
(
LLL |
Quote |
Chart |
News |
PowerRating), and
(
TRW |
Quote |
Chart |
News |
PowerRating).
Once again, the Nasdaq
(
$COMP |
Quote |
Chart |
News |
PowerRating) led the
charge to the tune of better than 3.6%. This happened despite the early pressure
coming from an earnings report out of Applied Materials
(
AMAT |
Quote |
Chart |
News |
PowerRating), and bodes
well for the bulls, as it looks like investors are putting on their horns.
Unlike yesterday, the market strength was broader based as well, as the
S&P500 registered gains of nearly 2.5% and the Industrials clocked in with
1.7% on the day.
Typical action of what one would expect in the
volatility indices with the general markets trending higher throughout the
session: You guessed it, both the VIX
(
$VIX.X |
Quote |
Chart |
News |
PowerRating) and VXN
(
$VXN.X |
Quote |
Chart |
News |
PowerRating)
finished decidedly lower, with the VIX, as if to play catch up, closing right at
the lower boundary of its recent trading range. This action had it outpacing the
VXN for the day. The VIX closed down nearly 10%, while the VXN was off about 4%.
Amazingly enough, still no CVR signals in either index, but we are getting
close.
The past couple Nightly Option Reports I’ve been talking about the
“coiled spring” that’s taking place in both equities and volatility.
My notes on this coiled spring effect have emphasized that the next move in
prices could push prices higher or lower from here. I have my opinion of
course, and as an investor I know which direction I’d prefer,up of course. As a trader the real bet
is for a significant, playable percentage move out of this trading range. Today’s action puts us that much closer, and as a trader I want to participate
from whichever the direction the market ultimately decides to pursue.
For nearly five months now and counting, we have
experienced higher-than-average volatility readings. This doesn’t mean we can’t
continue along this path, as trends do tend to persist longer than anyone thinks
possible. But inversely, all trends must reverse. Stay prepared for battle,
know your numbers and take action. That’s how we win the war.
Points of Significance:
Volatility Index |
Close |
Net Change |
Signals/Direction |
% Above/Below 10 Day Moving Average |
Significance |
VIX |
32.60 | DOWN -3.68 |
NONE | 5.89%Below | Not At Extreme |
VXN |
52.40 | DOWN -2.06 | NONE |
0.0% | 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 |
| Halliburton | HAL |
+14% |
42356 | 8653 |
| Konink.Philips Elec. N | PHG |
+ 9% | 5364 | 651 |
| C.I.T. Group |
CIT |
+6% |
12468 | 434 |
| Lehman Bros | LEH |
+4% | 10238 | 3024 |
| Cognizant Tech.Sol. |
CTSH |
+4% |
5215 | 1084 |
| Honeywell | HON |
-8% | 16588 | 2041 |
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 |
|
Honeywelll |
HON |
56.7 | 45.4 | 62.0 | 33.1 |
| Affiliated Computer |
ACS |
59.4 | 50.6 | 70.2 | 31.3 |
| BellSouth | BLS |
53.3 | 47.1 | 63.2 | 22.1 |
Spike Down
Name |
Symbol |
IV |
Previous IV |
High IV |
Low IV |
|
Household International
|
HI |
52.3 | 87.6 | 88.7 | 30.0 |
| Priority Healthcare |
PHCC |
45.9 | 57.2 | 70.8 | 42.4 |
| eBay | EBAY | 39.9 | 44.3 | 66.4 | 42.5 |
| Block (HR) |
HRB | 65.5 | 74.7 | 64.2 | 31.4 |
Please use stops on every trade!