Monday’s Option Alerts

  • January 31, 2003
  • Chris Tyler

In Friday’s session the VIX
continued to consolidate at what had been prior resistance on the daily price
chart. With the ETFs establishing
critical tests of support the past two sessions this action, this is, at a
minimum what one might expect, and likes to see, if there is a chance for a
rally. The VXN on the other hand continues to puzzle. It could have been a great
reversal day if the VXN would have acted in concert with his equity index brethren.
What I mean to say is that with tests of support, and reversals off of support
levels in all three of the ETFs it would make the decision to say “oversold
that much easier if the VXN could stage a solid leg higher to prior resistance,
or at least somewhere a bit closer to something resembling fear.

Mama never promised you a rose garden though, and
the market, if it starts to smell fresh again, will do so because of our
absolute discipline of “spreading out” our positions with option
strategies to fit the conditions at hand. There are opportunities, although
admittedly the market’s continued choppy action makes it difficult. But this is
all the more reason to focus on opportunities in the options markets. 

Case in point, RMBS, which exploded to the upside
two days ago, and not so coincidentally on our list of stocks with spikes up in
implied volatility has continued to present opportunities. For those of you who
are fortunate to join us in the TM chat room each day, EXPE was mentioned on
more than one occasion as an excellent bear put spread opportunity. Have a great
weekend, and remember, “price, volume, and SPREAD!!”

Points of Significance:

Volatility
Index		 Close Net
Change		 Signals/Direction %
Above/Below 10 Day Moving Average		 Significance
VIX 35.66 Down
-.71		        
None		 5.17%
Above 		Not
at Extreme
VXN 46.52 Up +.31       
 CVR I  		 5.37% Above Not
at 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 and / or
technical situations,
reflecting increased speculation of a potential price move.

Name Symbol Net
% Change		 Volume Avg.
Volume
Rambus 
RMBS		       
+23%		 26325 3978
Hewlett Packard
HPQ		        -4% 31334 12527
QLogic
QLGC		       
-6%		 40268 12239
Cognizant
Technology
CTSH		       +3% 8117 3358

 

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
Emulex
ELX		 77.5 70 117 71.5

 

Spike Down

Name Symbol IV Previous
IV		 High
IV		 Low
IV
Avid
Technology
AVID		 59 69 72 50

 

Please use stops on every trade!