Microsoft’s Re-Trial Spreads Limited Appeal
Just
what exactly will it take to ignite a sustained buying spree in this
market (options)? With yesterday’s surge in the stock market, coupled with
word of another mid-session rate cut by Mr. Greenspan (possibly due Wednesday),
one might expect options players to be buying calls and moving significant
paper. But this hasn’t been the case, especially in the early hours of the
day.
Even the strong
possibility of a reversal in the Microsoft verdict that would keep the tech
titan intact hasn’t wooed the buyers. And
didn’t some pundits dub this verdict “the chief cause†of the markets’
subsequent pernicious slide? Many
long-time options practitioners, myself included, are a bit surprised.
Except Softie has
held up, adding this morning to yesterday’s nice gain. It moved over a buck
and half yesterday since we posted, and tacked on another three quarters to a
dollar so far this morning. All has given rise to the values of our two
showcased spreads.And how are our
spreads doing? Today, it’s bid
better at $2 1/4. For the more daring
investors, we found the MSQ April 55/65 call spread which was in the money
yesterday and could be bought at 4 11/16. Today,
the spread is trading 5 1/2 – 5 7/8, representing a one-day pop 20% to 25% for
each, with a 4% move in the stock. These profit percentages depend of course
upon your commissions and exit point.
I don’t suggest
leaving the spread so quickly and will stay in touch while watching the case
developments and looking for other spreads that may complement these.
Volatility
remains relatively low; this is the result of another day of anemic order flow.
Indeed, today’s order flow registers only a 1.4 on our scale of 1 to
10, with 2.6 being the 30-day moving average. Whatever
“movement†there is can be found in the tech sector, where
(
CSCO |
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PowerRating),
(
INTC |
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and
(
BRCM |
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some flow in
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NVLS |
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PowerRating), with a small flurry of call buying.
Here are
today’s numbers…
Pre-open
order volume was light this morning. Overall, call sellers led buyers
at 3:2, while put sellers beat out buyers at 3:2. In pre-bell activity,
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AOL |
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call sellers outnumber buyers 2:1. BRCM
call buyers showed up crushing sellers 7:1. INTC
call sellers led buyers 3:2, while put sellers beat buyers 5:3.
[MSFT|MSFT]
call sellers led buyers 5:3.
First-hour
order volume was very light this morning. Overall, call sellers led buyers
at 3:2, while put sellers beat out buyers at 3:2. In first-hour activity,
MSFT call sellers outnumber buyers 2:1, while put buyers beat sellers 2:1.
[CIEN|CIEN]
call buyers showed up leading sellers 5:2. INTC
call sellers dominated buyers 3:2, while put buyers beat sellers 5:4. BRCM call
buyers led sellers 7:2. AOL call sellers outnumber buyers 5:2.
[WCOM|WCOM]
call sellers outnumber buyers 7:1, while put sellers beat buyers 2:1.
In any event,
keep those questions coming. I
continue to get some excellent ones, and I promise to answer.
We are databasing these Q&A’s so
that we can map out the most efficient and topical column possible.