Buyers Show Faces As Order Flow Increases

• January 24, 2001
• Tony Saliba

Halfway
into the trading week, options players seem more anxious to get into
the game. Call Sellers are still the big-men-on-campus, but buyers have begun to
rattle their swords, at least more so than in recent weeks. 
In fact, many of you have
asked about our order flow data, and the preponderance of call selling we see. 

It
is true that our proprietary data in recent weeks has demonstrated heavy selling
out of the blocks each morning (that’s the time frame of our column, so I
can’t get you the data more regularly). This information has (it would seem)
forecast the recent drop in volatility levels in general…this indicator
doesn’t always “predict” such results, but is usually more than a
gentle reminder. A close look at our hour-to-hour data reveals the following:

First,
the pre-open and first hour data has been relatively high with regard to
sellers, while the mid-day readings have been more balanced. Buyers have tended
to come back a bit towards the middle of the trading day, but net on the day we
have been getting customer selling.

We
wish to stress again that these are not volume numbers…they are order flow
numbers. Individual attempts by real customers at being filled on option
orders…not a resultant number of contracts executed, which are typically
distorted due to large combinations. I don’t care what they tell you. Volume
data is not clean, does not show sentiment, but does have the impact they speak
of, if you cull out the hedge noise. This distinction, and the approach we take,
makes our proprietary data unique, and we believe of particular value to our
readers.

And
now let’s check out this morning’s flow…

Pre-open
order volume was heavy this morning. Overall, call sellers led buyers 3:2, while
put sellers squashed buyers at 2:1. In pre-bell activity,
(
CPQ |
Quote |
Chart |
News |
PowerRating) call sellers
outnumber buyers 4:1.
(
ORCL |
Quote |
Chart |
News |
PowerRating) call sellers led buyers 3:1, while put sellers led
buyers at 2:1.
(
JNPR |
Quote |
Chart |
News |
PowerRating) call buyers
showed up leading sellers 2:1. 
(
ENE |
Quote |
Chart |
News |
PowerRating)
call buyers crushed sellers.
(
MSFT |
Quote |
Chart |
News |
PowerRating) call buyers dominated sellers 3:2. 
(
BRCM |
Quote |
Chart |
News |
PowerRating) call sellers outnumber buyers 2:1. 
(
CSCO |
Quote |
Chart |
News |
PowerRating) call buyers showed up leading sellers 5:4.

First-hour order volume was heavy this morning, registering a 35 on our scale of
1-100. Overall, call sellers led
buyers 3:2, while put sellers beat buyers at 3:2. In first-hour activity,
CPQ call sellers outnumber buyers 8:1. 
(
SUNW |
Quote |
Chart |
News |
PowerRating)
call sellers led buyers 4:1, while put buyers led sellers at 3:2.(
LU |
Quote |
Chart |
News |
PowerRating) call sellers led buyers 
4:1. ENE call buyers
crushed sellers 3:1.
(
CIEN |
Quote |
Chart |
News |
PowerRating) call sellers outnumber buyers 4:1.(
QLCG |
Quote |
Chart |
News |
PowerRating) call buyers showed up leading sellers 3:1. 
(
NTAP |
Quote |
Chart |
News |
PowerRating) call buyers crushed sellers 2:1

I
am trying to get the ability to show you these numbers throughout the day. If
not on this site, then through your access to this site. We are
working on it. We have another lesson segment coming up this weekend. The
SpreadSearch is running. I’ll let you know what looks ripe when I see some.

Questions
are good, tonys@tradingmarkets.com,
and keep ’em coming.