Does Strength In SAP Bode Well For SEBL?
Strength in SAP for the last
two sessions has certainly helped a number of software makers. Typical of most
sessions, the dollar-weighted money flow tells a more complete story than mere
volume or regular put vs. call ratios.
Today, we’ve seen strong money flows into shares of Microsoft
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and Oracle
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would appear to be the stepchild. That perception would be completely wrong, as
the dollar-weighted money going into SEBL is quite strong indeed.
As of 12:30, we show dollar-weighted call-to-put ratio of a very bullish 5-to-1.
Particularly, the 2000 January 55 calls are trading 10 1/2 – 11, so the buyers
are indeed picking real calls, not just taking cheap shots. Outside of those
January doubles (55s in trader speak), there is pretty strong interest in the
60, 65 and 80 calls, as well as the Feb 85s.
Given the sell-off in SEBL from $120 in October to half of that ($62 5/8
as of 12:30 pm CST) there may be some fire behind this smoke. We liked the idea
of buying the SEBL MAY 70 — 95 bull call spread for $7. Prices looked like
paying $13 for the May 70s and selling the May 95s for $6. A $25 bull call
spread for $7 is usually enough to perk our interest and coupled with the
potential rebound of the software group, make this an attractive risk-vs.-reward opportunity.
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