Market Cries Uncle
A sloppy market this morning may be in reaction to the Veep’s speech last night,
in which he promised to drag on a legal battle for the presidency. It seems that most
Americans, and the market, indicate they simply don’t want this. This political event,
coupled with the low Durable Goods number released today and the mediocre-to-poor (“C-“)
Consumer Confidence number, pushed volatility higher in the early morning options market,
but only slightly.
This modest reactive bounce in volatility perhaps suggests a dawning consolidation to
the market, as the fiasco that was Election 2000 draws toward its inevitable end. To
reiterate, the market is virtually begging for a Bush victory, and many good names that
continue to be beaten down stand ready to bounce back in a stable political atmosphere. We
continue to believe that the “end of the year rally” may yet take place.
Attentive readers will notice that a “loop” has been closed in terms of our
suggested strategies over the past three weeks. Earlier on, when completely uncertain
political events whipped the markets around, we suggested putting on vertical spreads,
buying cheaper options and refraining from shorting premium. Last week, and then again
yesterday, on an up-trend, upon the certification in Florida and the end of the election
fiasco at least visible, we suggested selling most (if not all) of the verticals we had
put on, and begin selling some premium as well. That would have left you with cheaper
vertical spreads; the verticals spread off in less risky butterfly spreads, or closed out
completely.
Pre-open order volume was moderate today. Overall, call sellers lead buyers at 2:1, and
put buyers are even with sellers at 1:1. The order volume leaders today saw
(
JNPR |
Quote |
Chart |
News |
PowerRating) and
(
BRCM |
Quote |
Chart |
News |
PowerRating) push into the top tier, with the top five rankings as follows:
(
INTC |
Quote |
Chart |
News |
PowerRating),
JNPR,
(
CSCO |
Quote |
Chart |
News |
PowerRating), BRCM
and
(
ORCL |
Quote |
Chart |
News |
PowerRating). BRCM call sellers showed up on news of a cutting back of that stocks price
target by key analysts, leading buyers 3:1. Pre-bell order flow in INTC was high, with
call sellers outnumbering buyers 4:1. JNPR call sellers lead buyers 3:2. ORCL call buyers
lead sellers 3:2, and sellers out numbered buyers 3:1. LU call buyers made their presence
felt, outpacing sellers 3:1.
After the first hour of trading, order volume remained moderate. Overall, call
sellers lead buyers at 2:1 and put buys and sells were even at 1:1. Top volume leaders
remained nearly the same:
(
INTC |
Quote |
Chart |
News |
PowerRating),
(
CSCO |
Quote |
Chart |
News |
PowerRating),
(
BRCM |
Quote |
Chart |
News |
PowerRating),
(
QCOM |
Quote |
Chart |
News |
PowerRating) and
(
LU |
Quote |
Chart |
News |
PowerRating). CSCO call sellers lead
buyers at a lop-sided 5:1 ratio. QCOM put sellers led buyers 4:1.
(
AOL |
Quote |
Chart |
News |
PowerRating) call
sellers over buyers 3:1.
(
CIEN |
Quote |
Chart |
News |
PowerRating) put buyers over sellers 4:1.
(
ADBE |
Quote |
Chart |
News |
PowerRating) showed heavier
volume than usual with put sells over buys 4:1.
Today we see that the strategy of beginning to sell has made sense and we would use any
rally to complete the closure of the higher strike verticals. We suggest checking out our
accompanying “lesson” for a thorough introduction to vertical spreads.
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