I Think I Can, I Think I Can…Nope…
Can
Christmas really be only a few days away? Yesterday
we compared Alan Greenspan to a second-rate Santa, whose rate decision (lack
thereof) was received by the market as a large lump of coal. We didn’t get you
into the best-leveraged put verticals. More than the majority of the tech stocks
that move around a great deal have been halved and are on their lows for the
past two years…does this mean that we can’t make money on further down
moves? No. Does this mean that there are some opportunities that are low-risk if
and when there is a bounce (even bear markets have sharp rallies)…yes. The
choice is: continued mayhem or choppy waters with the chance of upside moves.
I am leaning
to the “bounce†scenario with a stalwart…CSCO. Here’s what I see if CSCO
moves back to $42 at the January expiration:
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All spread does not signify trade-ability or STC’s willingness to trade at
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The Jan
37.5/40 call spread has the best risk/reward of these low-risk verticals. For
each $1000 invested (risked) you can buy 9 spreads, pay $1 1/8 and with a move
back to $42, double your money, even after commissions.
Bottom
picking is translating into some more call buying in the tech sector. By and
large, players are hanging on the sidelines to survey the extent of the carnage
and to decide how next to move. Here’s how the numbers look:
Pre-open
order volume is still moderate today. In the overall market, call sellers led
buyers 3:2, while put buyers and sellers were even at 1:1. The top five pre-bell
order-volume leaders today are as follows: CSCO, MSFT, DELL, INTC and AOL.
MSFT put sellers are out in force, leading buyers 11:1.
CSCO put sellers lead buyers 7:1. DELL put buyers are hammering sellers
17:1, while call sellers lead buyers 3;1. SUNW
call buyers outpace sellers 7:1. LU
call buyers led sellers 7:1.
First-hour
order volume remained moderate. Overall, call buyers led sellers
3:2, while put buyers led sellers at the same ratio. The top five first-hour
order-volume leaders today are as follows: CSCO, LU, PALM, INTC and AOL.
PALM call buyers are out in force leading sellers 6:1, while put sellers
led buyers 3:1. BRCD put
buyers outpace sellers 6:1. T put buyers led sellers 3:1. INTC call
sellers outgunned buyers 2:1, while put buyers crunched sellers 6:1. QLGC
put sellers led buyers 4:1. LU call buyers dropped back to a 2:1 lead over
sellers.
CSCO, formally
a shining star, has been more than tarnished lately. Today we introduce
our spread-search data to the reader, which will be described in detail in
future columns. Check out these spreads, as we are, and follow them through
expiration.