Call Selling Continues In Lackluster Market
The split between the “old economy” and the “new
economy” was in full view yesterday, as blue chips surged higher on hopes of future
Fed interest rate cuts while techs tumbled amidst continued earnings nightmares. Options
players are responding this morning with a yawn and a shrug — volume is light with a very
slight drop in volatility. Call selling is in effect again today, most notably in the tech
sector, but at a much more subdued pace than yesterday. But the pace of the market may
quicken (and volatility spike) as economic and political events unfold later in the day
I’d say that all eyes are focused on two big meetings today…first, the
Federal Reserve meeting, and second, the anticipated meeting between Bush and Gore. Options
practitioners can only hope that president-elect Bush exerted enough pressure (cajoling?)
on Chairman Greenspan yesterday to jettison long-standing inflation-intoxicated talk and
to implement some interest rate cuts next year. This, along with talk about the details in
Bush’s planned tax cut, might combine with a ‘handshake’ between the
Presidential foes to make for a general market Christmas present that won’t be opened
until next year.
Pre-open order volume was light today. In the overall
market, call sellers led buyers 2:1, and put sellers and buyers were even at 1:1. The top
five pre-bell order volume leaders today are as follows: CSCO, MSFT, AOL, SUNW and INTC.
CSCO call sellers outpaced buyers 4:1, while put sellers led buyers 3:1. ORCL call sellers
are crushing buyers 10:1. LU call sellers lead buyers 8:1, while put sellers lead buyers
3:1. SUNW and INTC put buyers trump sellers 3:1. CSCO put sellers lead buyers 5:2, while
call buyers and sellers are evenly split. SEBL had heavier than normal activity, and call
sellers beat out buyers 7:1. In sector news, the energy sector showed a high call sell to
buy ratio of 10:1.
First-hour order volume is down even farther, down 33% from its
30-day moving average. Overall, call sellers led buyers 5:4, and put sellers ahead of
buyers 2:1. The top five order volume leaders in the first hour: CSCO, MSFT, INTC, CIEN
and SEBL. CSCO put sellers swamped buyers 12:1, while call sellers were even with
buyers. INTC call sellers are leading buyers 4:1 and put buying completely dominated the
hour. SEBL call sellers lead buyers 2:1, while put sellers lead buyers 7:3.
At this point, no interesting strategies stand out. Continue
scanning for diamonds in the rough, as will we, and stay tuned.