Wednesday’s Options Alerts
Today’s trading range
action ended with all of the ETFs still waiting. Notice the words
“trading range,” as this action has carried over into the intraday
trading as well, as we pretty much finished off right where we started. That’s
not to say there wasn’t volatility–there was to some degree–but even this was
confined to less than a percentage point in either direction, as measured by the
S&P 500 ETF
(
SPY |
Quote |
Chart |
News |
PowerRating) and the Dow
(
DIA |
Quote |
Chart |
News |
PowerRating).
The Nasdaq has gone from champ to chump the past
two sessions as recent relative strength has been put on hold, at least
temporarily. Downgrades of QCOM, MSFT, and AMZN, as well as a Neutral
recommendation, to start the ball rolling on eBAY, burdened tech heavyweights
for much of the day. The Nasdaq 100
(
QQQ |
Quote |
Chart |
News |
PowerRating), not so coincidentally ended the
session down about 1.5%, the worst performer among the big three, and the only
major with more than a fractional percentage move.
Volume was moderate today as the ETFs
continue to consolidate, and once again my message is to
stay prepared. The VXN
(
$VXN |
Quote |
Chart |
News |
PowerRating) is starting to send out what might be
considered interesting signals. As mentioned, the Nasdaq was the only major
index with real downwards pressure applied throughout the session, and although
it remains entrenched in its trading range on the daily charts, the VXN was able
to put in fresh lows and essentially test the August lows (August Highs in
equity prices). This action has the VXN catching up to the VIX in terms of where
they stand on their respective daily charts.
Does this signal too much
complacency on the part of investors? Could be, but I’m not betting the ranch on
a directional bet in equity prices. As I’ve stated recently, between more
constructive technical action in the ETFs than we’ve seen in an awful long
time, and the fact that if volatility is mean-reverting, then the next percentage move in equities might just be up, before
down. The real world is never just black and white, and so it goes that the
market is full of shades of gray at the moment. Some of the widely followed
sentiment indicators are signaling more complacency than price is, but ultimately,
it’s price and volume that I respect the most..
During times like these, as option traders, it is especially important to keep focused on
opportunities. Volatility in many individual issues has decreased substantially
and might present better trading opportunities than the actual underlying stocks
or ETFs. Without emphasizing either a bullish or bearish stance, many of our
trading decisions might present better risk-to-reward ratios in the form of in
or slightly in the money puts or calls. In my normal course of poring over
charts and looking at the related option markets, I’m finding
options as the vehicle of choice as we drive along this rather narrow road
called a trading range.
Points of Significance:
| Volatility Index |
Close | Net Change |
Signals/Direction | % Above/Below 10 Day Moving Average |
Significance |
| VIX | 31.36 | Up +.25 |
CVR 2 Sell |
6.92% Below |
Not At Extreme |
| VXN | 45.52 | DOWN -2.57 | CVR3, 6 Sell |
11.95% Below | At An Extreme |
Abnormal Options Volume — This list
includes both percentage movers that are normally associated with an increase in
options activity, as well as stocks that have unusually high activity,
reflecting increased speculation of a potential price move.
| Name | Symbol | Net % Change |
Volume | Avg. Volume |
| Marvell Technology |
MRVL |
-6% |
4871 | 2108 |
| Polymedica | PLMD |
-1% | 1288 | 367 |
| Manhattan Associates |
MANH |
0.0% | 4156 | 353 |
| Banc of America | BAC |
+1% | 31500 | 7478 |
Stocks With Spikes in Implied
Volatility — Stocks with Increases and Decreases in implied
volatility compared to previous day. Candidates are then screened qualitatively.
These lists represent those issues that carry a blend of liquidity and/or
technical setups that might deserve further notice.
Spike Up
| Name | Symbol | IV | Previous IV |
High IV |
Low IV |
|
Marvell Technology |
MRVL |
100 | 82.6 | 118.7 | 63.6 |
| Intersil Holding |
ISIL |
73.7 | 67.5 | 100.2 | 68.9 |
Spike Down
| Name | Symbol | IV | Previous IV |
High IV |
Low IV |
|
Charles River Labs
|
CRL |
36.7 | 40.7 | 57.8 | 35.6 |
| Amgen | AMGN |
41.5 | 47.0 | 73.3 | 28.4 |
Please use stops on every trade!