Monday’s Option Alerts

• January 24, 2003
• Chris Tyler

In Friday’s session the bear’s
claws left a deep impression on the would be bull. The
tourniquet being applied to the ETFs as we make our way into the weekend are the
50% Fibonacci retracements and trading range lows in the ETFs. With the flesh
wounds spouting red all over the equity markets, the tourniquet (price supports)
has not stopped the bleeding completely. There is closing evidence that at least
one of the casualties, the SPY, doesn’t have the proper bandage on, as this ETF
closed below the 50-EMA, as well as the trading range lows.

Volatility picked up on the session in both the
(
$VIX |
Quote |
Chart |
News |
PowerRating) and the
(
$VXN |
Quote |
Chart |
News |
PowerRating). As a matter of fact, volatility surged higher in the VIX, up
over 15% in today’s trade. I said last time that we had a good sign for a
potential reversal as both indices were registering higher prices. I guess it’s
safe to say that with Friday’s trade, now we have a great sign. Couple this
evidence with price extensions down to support levels, and we have the makings
of fear in the market place.

 Is the reversal tomorrow? It would be nice
to have a definitive yes for an answer, and it sure feels like (intuitive market
sense) that could be the case. But as always, use price and volume as your guide
in making trading decisions. And of course, it goes without saying, that for
every decision made there’s an option strategy out there waiting to leave its
own bullish impression on your portfolio (Suggested Hint for bullish plays:
selling put verticals or one by two call ratio spreads on high implied
volatility, strong relative strength issues). Have a good weekend.

Points of Significance:

Volatility Index	Close	Net Change	Signals/Direction	% Above/Below 10 Day Moving Average	Significance
VIX	36.02	Up +5.05	         CVR IIIÂ	21.42% Above	At An Extreme
VXN	45.48	Up +2.21	        None Â	4.11% Above	Not at Extreme

 

Abnormal Options Volume — This list
includes both percentage movers that are normally associated with an increase in
options activity, as well as stocks that have unusually high activity and / or
technical situations,
reflecting increased speculation of a potential price move.

Name	Symbol	Net % Change	Volume	Avg. Volume
BoeingÂ	BA	       -3%	4764	1679
UT Starcom	UTSI	       -14%	3928	946
Starbucks	SBUX	       +15%	28696	3289

 

Stocks With Spikes in Implied
Volatility — Stocks with Increases and Decreases in implied
volatility compared to previous day. Candidates are then screened qualitatively.
These lists represent those issues that carry a blend of liquidity and/or
technical setups that might deserve further notice. 

Spike Up

Name	Symbol	IV	Previous IV	High IV	Low IV
Microsoft	MSFT	42.6	36.3	59.5	30.7
Wallace Computers	WCS	26.8	23.4	44.6	26.8

Spike Down

Name	Symbol	IV	Previous IV	High IV	Low IV
Proquest	PQE	34.6	46.5	69.4	45.1
Amazon	AMZN	53.5	61	95	60
Starbucks	SBUX	29	35.6	58	30

 

Please use stops on every trade!