Thursday’s Options Alerts…

  • January 9, 2002
  • TradingMarkets Editors

SAP’s
(
SAP |
Quote |
Chart |
News |
PowerRating) comment about a better-than-expected fourth quarter, along with Cisco Systems’

(
CSCO |
Quote |
Chart |
News |
PowerRating)optimistic
comments, and news of Merrill Lynch’s
(
MER |
Quote |
Chart |
News |
PowerRating) employee layoffs ignited a sharp
rally early on. However, the rally burned out during the final hour of trading. For more information
on today’s action, please
refer to the market
recap. The VIX
(
$VIX.X |
Quote |
Chart |
News |
PowerRating) opened and closed in the top third of its range.
This intra-day shift in sentiment
suggests that fear is now rising. We have another CVR
VI sell signal today. The VXN
(
$VXN.X |
Quote |
Chart |
News |
PowerRating)
opened in the lower half of its range and closed near the highs of the day. This intra-day shift in sentiment also
suggests that fear is rising. The VXN triggered a CVR I sell signal today. Both
volatility indices shot up towards the end of the trading day when news of a U.S.
military refueling plane crashing hit the wire.

Points of Significance:

Avaya
(
AV |
Quote |
Chart |
News |
PowerRating), a spinoff from Lucent Technologies
(
LU |
Quote |
Chart |
News |
PowerRating), dropped 17% on almost 10 times its average volume today. The shares
have now broken below their .618 retracement level from their November 2001 low to
their December high. The company announced today that they will post a fourth quarter
loss instead of anticipated profit, no reason was given. Moody’s Investor
Services followed by downgrading its long-term credit rating. Options on Avaya
traded over double its average volume. Avaya’s implied volatility is low, thus
making its options cheap.

IMPCO Technologies
(
IMCO |
Quote |
Chart |
News |
PowerRating), an alternative
fuel source maker, gave back all of yesterday’s gains and formed a bearish
engulfing bar on over 14 times its average volume. There is heavy volume in the January
12.50 calls and February 15 calls.

RF Micro Devices
(
RFMD |
Quote |
Chart |
News |
PowerRating) broke below short-term support on over double its average volume. Options on RF Mirco Devices
traded almost triple its average volume. There is heavy activity in the January
17.50 calls and February 25 calls.

Implied volatilities on IVAX
(
IVX |
Quote |
Chart |
News |
PowerRating) and
BankAtlantic Bancorp
(
BBX |
Quote |
Chart |
News |
PowerRating) are low. Look for long volatility strategies such
as backspreads, straddles, strangles, and outright option purchases.

Volatility
Index		 Close Net
Change		 Signals/Direction %
Above/Below 10 Day Moving Average		 Significance
VIX 23.29 UP 0.74 CVR
VI Sell		 2.33 % Above Not At Extreme
VXN 48.28 UP
0.83		 CVR
I Sell		 1.62
% 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
Avaya Inc. AV – 17.00 817 317
Impco Technologies IMCO – 16.82 1459 155
Informatica Corporation INFA – 14.12 586 174
Plug Power PLUG – 12.79 1739 327
RF Micro Devices RFMD – 12.26 15289 5644
Oxford Health Plans OHP + 12.00 2171 663

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
IVAX IVX 72.6 56.6 67.9 45.3
Dow Chemical DOW 39.1 30.9 41.6 30.4
AnswerThink Inc. ANSR 75.2 62.1 113 79.4
Sunrise Assisted Living SRZ 43.5 36.6 49.4 39.7
Conagra Inc. CAG 30.1 25.4 30.8 25.1
Net.Bank NTBK 41.2 34.9 83.4 36.6

Spike Down

Name Symbol IV Previous
IV		 High
IV		 Low
IV
Dal-Tile Int’l DTL 23.8 35 32.3 27.1
ServiceMaster SVM 21.5 31.2 33.8 21.5
BankAtlantic
Bancorp		 BBX 37.4 47.7 57.8 44.2
Host Marriot HMT 38.1 48.3 78.6 31.5
Stellent
Inc.		 STEL 72.7 87.2 101.4 74.1
Select
Medical Corp.		 SLMC 65.5 77.9 63.7 61.8

Please use stops on every trade!