Friday’s Options Alerts…

• October 25, 2001
• TradingMarkets Editors

Stocks started the session under water as
negative economic data and more cases of anthrax shook the markets.
Jobless claims rose to the second highest reading in almost a decade and orders
for durable goods also slumped for the fourth consecutive month. The
news sent the Dow
(
$INDU |
Quote |
Chart |
News |
PowerRating) down 140 points and the Nasdaq
(
$COMPQ |
Quote |
Chart |
News |
PowerRating)
down
over 40 points within the first hour of trading. However all indices began to turn
around this afternoon to close higher for the day.
Today the VIX
(
$VIX.X |
Quote |
Chart |
News |
PowerRating) opened at the upper half of its range and closed
near the lows. Once again, this intra-day shift in sentiment tells us that fear is
continuing to subside. However the VIX is now in oversold territory,
which means that the market is overbought. Keep in mind though that we
must wait for the RSI of the VIX to uptick before it gives us a CVR
II sell signal. In addition, the VIX has moved to an extreme as it is now
over 10% below its 10 day moving average today, thus giving us a CVR
III sell signal. Likewise the VXN
(
$VXN.X |
Quote |
Chart |
News |
PowerRating)
exhibited similar behavior as it too opened near the top of today’s range but
the closed right at the low of today. Once
again this intra-day shift in sentiment continues suggests that fear is
subsiding. Like the VIX, the VXN is also in oversold territory which means that
the Nasdaq stocks are overbought. In addition, the VXN has also moved to
an extreme as it too has moved over 10% from its 10 day moving average.
Thus the VXN also triggered a CVR
III signal for today. With both volatility indices giving us sells
signals for the day, we could see a down move for the next one to three days.

Points of Significance:

Zebra Technologies
(
ZBRA |
Quote |
Chart |
News |
PowerRating) broke above its
50-
and 200-day moving averages on six times its average daily volume. It’s implied
volatility is also towards the low end of the range. Getty Images
(
GETY |
Quote |
Chart |
News |
PowerRating)
gapped up and broke above its 50-day moving average on double its average daily
volume. Its implied volatility is at a new low, which could mean the options are
cheap. Old Republic Int’l
(
ORI |
Quote |
Chart |
News |
PowerRating) continues to pullback from recent
lows. It also broke above its .382 retracement level today. ORI’s
implied volatility is also near the low end of the range. Michael’s Stores
(
MIKE |
Quote |
Chart |
News |
PowerRating)
shot up on over four times its average daily volume. Implied volatility is also
at a new high. Metris Companies
(
MXT |
Quote |
Chart |
News |
PowerRating) continued to drop today on double its
average daily volume. Its implied volatility is at a new high.

Abnormal Options Volume With Price Movement

– Abnormal options volume (calls and puts) with stock price movement

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

Spike Up

Spike Down

Please use stops on every trade!