Friday’s Options Alerts

• July 18, 2002
• TradingMarkets Editors

Trading was
slow and choppy in the morning, but selling pressure arrived in early afternoon
trade as rumors of large mutual fund redemptions were forcing fund managers to
sell positions. The major indices staged a broad-based decline on
this earnings-packed Thursday. At the close, the Dow
(
$INDU |
Quote |
Chart |
News |
PowerRating) gave up 133
points or 1.55%, it looks ready to test Monday’s low. The S&P 500 dropped
24.5 points or 2.70% and after several sessions of out-performance, the Nasdaq
(
$COMPX |
Quote |
Chart |
News |
PowerRating) fell 40 points or 2.88%.  

Virtually
all sectors were red, with software
(
$GSO.X |
Quote |
Chart |
News |
PowerRating) leading the decline as Siebel
Systems missed their second quarter earnings and warned for their fourth
quarter. Insurance
(
$IUX.X |
Quote |
Chart |
News |
PowerRating), health care
(
$HCX.X |
Quote |
Chart |
News |
PowerRating), and drugs
(
$DRG.X |
Quote |
Chart |
News |
PowerRating)
were also big losers. Economic data came in mixed today as weekly initial
jobless claims fell 28,000 to 379,000, thus hitting an 18-month low. On the
other hand, the index of leading economic indicators came in flat vs.
expectations of a 0.1% gain. Economist Ken Goldstein said it best when he said
that “We continue to be in a jobless, profitless recovery."
In after-hours news, Microsoft
(
MSFT |
Quote |
Chart |
News |
PowerRating) reported results that beat
expectations by a penny, but the shares are off about a buck.

The VIX
(
$VIX.X |
Quote |
Chart |
News |
PowerRating) gapped higher,
opened near the top third of the range, and closed just above its open. This shift
in intraday sentiment actually shows a small drop in fear. No CVR signals were
triggered today. The VXN
(
$VXN.X |
Quote |
Chart |
News |
PowerRating) gapped higher, opened near its highs,
and closed in the lower half of its range. This shift in intraday sentiment
also shows a decrease in fear. The VXN didn’t trigger any signals today.

Points of Significance:

Baxter International
(
BAX |
Quote |
Chart |
News |
PowerRating) dropped 11% on
more than 10 times its average volume. The shares plunged today as Baxter’s
sales of its plasma products caused second quarter revenues to fall below
estimates. The shares broke below their 78.6% retracement from its March 2000
low.

THQ Inc.
(
THQI |
Quote |
Chart |
News |
PowerRating) fell 8% on almost double its average
volume. The company, which raised guidance and reported results in line with
estimates Wednesday, dropped to a 15-month low today on concerns about its
receivables. Its implied volatility is very high, so look for opportunities in
ratio spreads.

Volatility Index	Close	Net Change	Signals/Direction	% Above/Below 10 Day Moving Average	Significance
VIX	39.95	UP 0.15	NONE	5.77% Above	Not At Extreme
VXN	63.61	UP 0.38	NONE	0.006 % Below	Not At Extreme

Abnormal Options Volume With Price Movement
—
Abnormal options volume (calls and puts) with stock price movement

Name	Symbol	Net % Change	Volume	Avg. Volume
Baxter International	BAX	– 26.28	8152	1561
Automatic Data Processing	ADP	– 23.57	2904	641
PNC Financial	PNC	– 14.82	34834	15509
Paychex	PAX	– 13.18	2735	1010
THQ Inc.	THQI	– 8.88	2674	1177
Sungard Data Systems	SDS	– 7.10	1351	259

Stocks With Biggest Spikes in Implied
Volatility — Stocks with biggest increases or decreases in implied
volatility compared to previous day

Spike Up

Name	Symbol	IV	Previous IV	High IV	Low IV
Insight Enterprises	NSIT	83.2	53.2	55.2	51.5
XL Capital	XL	67	45.6	40.3	25.6
National City Corp.	NCC	39.9	27.5	27.2	16.9
First Merit	FMER	36.1	25	28.7	19.3
Biotech HOLDRs	BBH	54.5	38.5	60.6	27.5
Capital One Financial	COF	104.9	78.4	62.9	39.1

Spike Down

Name	Symbol	IV	Previous IV	High IV	Low IV
Koninklijke Ahold	AHO	46.7	55.4	54.5	27.3
Allied Capital	ALD	52.6	62.2	75.7	27.2
National Insturments	NATI	45.9	52.9	47.4	35.7
United Parcel Service	UPS	24.9	28.6	22.7	11.5
Celestica	CLS	84.9	97.4	91.7	56.8
Household International	HI	57.5	65.3	58.5	30

Please use stops on every trade!