Order Flow Drops Off As Traders Await Fed’s Move
Options
players came to the table this Tuesday morning hoping to ride the
wave of yesterday’s momentum. Order flow had climbed its way back to a
somewhat higher level over the past couple of days, but dropped off
significantly again today. It remains well below last year’s averages. Today,
it registers a 1.0 on a scale of 1.0 to 10.0, with 2.0 being the new 30-day
moving average.
Traders continue
in their early A.M. holding pattern of selling premium, with today’s twist
being the interest in the Fed’s possible move today. Overall call sellers are
marking their territory, beating out buyers. Yesterday’s late run-up has
provided for some selling opportunities. Put
sellers are much less visible today, as the feeling may be that this move will
be short-lived. Volatility remains lower, having come in noticeably from last
week’s highs.
The biggest news
affecting the options market right now has yet to happen: traders and investors
alike stand poised to react to an expected substantial interest rate cut by the
illustrious Mr. Greenspan. The big
question is: “What if he doesn’t cut rates enough?â€
Will the markets
react to a modest rate cut negatively? Because
of this uncertainty, options practitioners must brace themselves for more
potentially whippy markets. My
personal feeling is to scale sell into any continuance of this rally. We’ll
see lower prices again, for sure.
Here are
today’s numbers…
Pre-open
volume was light this morning. Overall, call sellers led buyers 4:1, while
put sellers led buyers 2:1. In pre-bell activity,
(
NT |
Quote |
Chart |
News |
PowerRating) call sellers
outnumber buyers 3:1, while put sellers trounce buyers 2:1.
(
LU |
Quote |
Chart |
News |
PowerRating) call sellers
led buyers 3:1. Â
(
AOL |
Quote |
Chart |
News |
PowerRating)
call sellers crushed buyers 13:1.Â
(
SUNW |
Quote |
Chart |
News |
PowerRating)
call sellers beat up buyers 2:1.
(
JNPR |
Quote |
Chart |
News |
PowerRating) call buyers dominated sellers 5:1.
(
NOK |
Quote |
Chart |
News |
PowerRating) call buyers led sellers 2:1 .
First
hour order volume was very light this morning. Overall, call sellers led buyers
3:1, while put sellers led buyers 3:2. In first hour activity,
(
EMC |
Quote |
Chart |
News |
PowerRating) call
sellers outnumber buyers 15:1, while put sellers trounce buyers 2:1. Â
(
TXN |
Quote |
Chart |
News |
PowerRating) call sellers crushed buyers 12:1.Â
(
BRCM |
Quote |
Chart |
News |
PowerRating) call sellers beat up buyers 9:1.
(
CPQ |
Quote |
Chart |
News |
PowerRating) call buyers dominated sellers
2:1.
(
AMCC |
Quote |
Chart |
News |
PowerRating) call buyers led sellers 4:1.
Our
two spreads in
(
MSFT |
Quote |
Chart |
News |
PowerRating) are none worse for the wear this past week. The April 55/65
call spread is out a buck and a half or so, while the 60/65 call spread is
cheaper by half that amount. If Microsoft moves back in this move to where we
entered the spread ($58 per share), I would sell a vertical on top of the one
you own. Scaling, scaling over the bounding main…
Keep
writing me those questions of yours, and I promise to answer:
tonys@tradingmarkets.com