Microsoft’s Re-Trial Spreads Limited Appeal
what exactly will it take to ignite a sustained buying spree in this
market (options)? With yesterdayâ€™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 hasnâ€™t been the case, especially in the early hours of the
Even the strong
possibility of a reversal in the Microsoft verdict that would keep the tech
titan intact hasnâ€™t wooed the buyers. And
didnâ€™t some pundits dub this verdict â€œthe chief causeâ€ 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 yesterdayâ€™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, itâ€™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 donâ€™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.
remains relatively low; this is the result of another day of anemic order flow.
Indeed, todayâ€™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
â€œmovementâ€ there is can be found in the tech sector, where
PowerRating) are fairly liquid. We see
some flow in
PowerRating), with a small flurry of call buying.
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,
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.
call sellers led buyers 5:3.
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.
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.
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.