Confusion Reigns Supreme
As the nation entered into an unprecedented “day three” of its presidential
election Thursday morning, the options market exhibited a corresponding degree of
uncertainty. Thus, my closing comments from yesterday, where I suggested that the market
might creep up today, must be suspended for the time being. With the overall confusion
generated by the electoral uncertainty and the accompanying recounts and possible
lawsuits, the market may instead prove sloppy, emotional and weaker.
PPI numbers were released this morning at 8:30 a.m. ET. Overall, there was a .4%
increase for Finished goods, but a .1% decrease for Core goods (goods other than foods and
energy) in October. These numbers are adding to the slight sell-off in the stock market
this morning, but as volatilities are not exploding, we can perhaps conclude that the
sell-off may be election-related and therefore short-term. Thus, options players should not conclude that the sell-off is necessarily long term.
Pre-open volume was up slightly from yesterday’s, but
remained low. In the overall market, call buyers equaled sellers at a 1:1 ratio, and put buyers matched sellers 1:1 as well. BRCM and JNPR climbed into the top five in
terms of volume, with stalwarts CSCO, MSFT and INTC rounding out the big volume players. BRCM paper was heavy in put buying, with a 3:1 ratio over selling. MSFT
showed a preponderance of put selling, at 3:1 over buying.
After the first hour of trading in the overall market,
call buying increased to 3:1 ratio over selling. Put sells are edging out buys 3:2. JNPR has a 5:1 call buy-to-sell ratio. INTC shows strength in call buying, with a
3:1 ratio over sells. Our volume leaders look similar, except that SUNW has
shot into first place. In SUNW, the bulls are out in force SUNW put sellers
outnumber sellers 2:1, and call buyers outnumber sellers 5:1.
Options players wait anxiously for the DELL earnings release after the close today, as the
computer giant’s numbers may affect that entire sector. A word of caution to you buyers out
there: Remember that volatility typically increases dramatically in the front month on the
day of earnings, so don’t wait to buy Dell options until the end of the day!
Tomorrow morning should see a marked decrease in Dell volatility.