Monday’s Options Alerts
Rabbit season! No, duck
season! Yesterday the ducks were out in earnest, quacking away all session
long. Today, although the feasting on
equities seems to have temporarily subsided (we do have to take a breather
before the really big feast around the corner), investors didn’t “turn
tail” like a scared critter jumping quickly back into the hole from which
it came. This should be considered a very constructive sign.
Although the major ETFs ended in the red on
the day, they showed some real resilience after yesterday’s volume and price
ramp up. The opportunity to digest recent gains with an ugly sprint to the
“facilities” as investors were confronted with possible indigestion,
was all but in the cards premarket. Notable downgrades of key Nasdaq component
stocks, a poor report out of
(
BRCD |
Quote |
Chart |
News |
PowerRating), and a book to bill report that was supposedly
a disappointment were all weighing in on the ET’s and HOLDRs. All said and
done, the averages held up quite well, especially if one considers that the
semiconductor HOLDR
(
SMH |
Quote |
Chart |
News |
PowerRating) was down only a percentage point, and the Nasdaq
100
(
QQQ |
Quote |
Chart |
News |
PowerRating) was off fractionally. Furthermore, as technical-oriented traders,
today’s trade had bullish undertones, as the volume was lighter as we pulled
back, and the breakout points from yesterday’s trade all held up on the session.
As I’ve stated before, price and volume will
be my first consideration when making trade decisions, and then I look for
confirmation or divergence with the volatility indices. For my trading, this
means I rely on looking at charts of volatility, to get a “feel” for
unsustainable price action. So what does this tell me? It tells me we’ve trended
lower towards more historic levels, which by the way, are still considerably
lower. The volatilities haven’t told me to panic just yet. (Panic being the
“sell Mortimer, sell” rule.)
I think most people will agree that it’s
easier to see the whites of their eyes during selloffs, as the market
experiences huge spikes in volatility and in equity prices that scream out
“EXTREME.” Less easy is trying to ride a trend, whether it’s up or
down. I think most people will also agree that trends have a tendency to persist
longer than anyone thinks possible. The point here is, let the trend be your
friend, but know when to let go. Knowing when to let go means having your rules
in place and trusting yourself to use them when it becomes obvious that your
friend is no longer the person you thought you knew.
Points of Significance:
| Volatility Index |
Close | Net Change |
Signals/Direction | % Above/Below 10 Day Moving Average |
Significance |
| VIX | 26.73 | Down -.64 |
CVR 3,6 Sell |
15.52% Below |
At An Extreme |
| VXN | 46.49 | Up +1.79 | CVR2, 5 Sell |
6.48% Below | 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,
reflecting increased speculation of a potential price move.
| Name | Symbol | Net % Change |
Volume | Avg. Volume |
| Electronic Data System |
EDS |
+8% |
24818 | 3197 |
| Broadcom | BRCM |
+3% | 23124 | 5646 |
| Adobe Systems |
ADBE |
+1% | 4475 | 761 |
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 |
|
National Instruments |
NATI |
52.7 | 39.8 | 68 | 35.7 |
| Charles River Labs |
CRL |
39.9 | 35.5 | 57.8 | 35.6 |
Spike Down
| Name | Symbol | IV | Previous IV |
High IV |
Low IV |
|
F5 Networks
|
FFIV |
70.4 | 81.8 | 127.2 | 77.2 |
| Neoware Systems |
NWRE |
70.7 | 80.7 | 108 | 78.8 |
Please use stops on every trade!