1-2 Punch KO’s Vols

• December 6, 2000
• Tony Saliba

Words, from Greenspan and
about Gore combined to relieve two heavy burdens from the minds of options
traders. Before the open yesterday, we all knew that the presidential election
lurched heavily towards closure with a courtroom verdict Monday evening. This
was worth good strength pre-open. Then while the Fed Chief delivered very soft
language on interest rates, bullish sentiment charged up stock prices, while
options interest was to lean on “Fat Calls.” These two significant
events provided for an intersection we rarely see. Selling pressure on options
created a dip of close to 10% across the board on the top 100 most active option
stocks. 

Our vertical spreads, those
that may be open, should have worked well, and we would act to sell higher
struck verticals to completely hedge ourselves. Spreads that have no higher
struck verticals of any value should be closed out with this move. The cheap
calls we had may actually come to life. Perhaps a chance to get some money back.
If you rolled them down, as we urged on the 24th, those at-the-moneys may have
worked to some degree yesterday. We found that the strength of the move overcame
the volatility decrease in some situations, but not many. 

Here’s how it looks this
morning…

Pre-open
order volume was heavy this morning. Overall, call sellers led buyers 3:2, and
put sellers and buyers were even at 1:1.  Top five order volume leaders were as follows:
(
CSCO |
Quote |
Chart |
News |
PowerRating),
(
INTC |
Quote |
Chart |
News |
PowerRating), 
(
MSFT |
Quote |
Chart |
News |
PowerRating), 
(
ORCL |
Quote |
Chart |
News |
PowerRating)
and
(
JNPR |
Quote |
Chart |
News |
PowerRating).  In pre-bell activity, CSCO call sellers
outnumbered buyers 2:1.  MSFT
call buyers were out in force leading sellers 3:2. 
(
NOK |
Quote |
Chart |
News |
PowerRating) call sellers
dominated buyers 5:2. 
(
AMZN |
Quote |
Chart |
News |
PowerRating) put buyers outpaced sellers 5:1. 
(
AAPL |
Quote |
Chart |
News |
PowerRating) put buyers swamped sellers 8:1.

The
first hour

volume remained heavy.  Overall, call sellers outnumbered buyers 3:2,
while put buyers and sellers were even at 1:1.  The top five volume leaders
were: JNPR, INTC,
(
QCOM |
Quote |
Chart |
News |
PowerRating), CSCO and
(
SUNW |
Quote |
Chart |
News |
PowerRating).  CSCO
put sellers led buyers 3:1, while call sellers led buyers 3:1. SUNW put buyers
outpaced buyers 3:1.  JNPR call buyers came out, leading sellers 2:1. Put
buying was unusually heavy in
(
MMM |
Quote |
Chart |
News |
PowerRating) and
(
NTAP |
Quote |
Chart |
News |
PowerRating).

We’ll stay the course with selective purchases of
vertical spreads. Put verticals may begin to look good here soon. We’ll scan for
some today and have them for presentation tomorrow.