4 bullish signs
If you’re looking for something constructive, be it a case of Bernanke-phoria or whatever, options do show some encouraging signs. Take the recent action of the put/call ratio for example.
I’m not a big proponent of this measure, as it’s subject to major “noise” such as large spreads that have no directional bias, but pump volume on one side of the ledger. That being said, I do like the 10-Day Moving Average of the CBOE put/call, more in terms of direction than absolute levels. And right now, that reading has just turned lower off a 6-month peak of about 1.05. Not stratospheric, but high.
Another bullish sign is the volatility jumps we continue to see ahead of earnings. It’s most pronounced in the energy patch as I noted recently, but it’s finally even rearing its head in “staid” techland. Here’s
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PowerRating), before the number was released (courtesy of www.ivolatility.com).
A 40 volatility is far from cosmic, but it’s nearly a 52 week high in
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PowerRating) during a stretch where the
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PowerRating) dipped below the
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PowerRating) for the first time (and yes I know
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PowerRating) is not a NASDAQ stock, but it exhibits identical volatility behavior).
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PowerRating) has a similar pattern.
What’s also noteworthy is that after the number’s are released, stock’s are moving abruptly out of the “comfort” range implied by even these relatively pumped volatility numbers, which will only serve to further ratchet up the nervousness ahead of the stream of releases through this week and next.
And all this comes in a backdrop where the standard volatility measures have lifted, but are far from soaring, and nowhere near a level that evokes Fear in anyone.
Adam Warner
Adam Warner is a proprietary trader for Addormar Co., Inc., specializing in option and derivative strategies. Prior to Addormar, he was an Equity Options Market Maker on the floor of the American Stock Exchange from 1988-2001.