Monday’s Options Alerts

• December 20, 2002
• Chris Tyler

Quadruple Witching
Expiration,…it sounds so threatening, but despite the namesake, Friday turned
out to be the first bullish close since Monday. With
no geopolitical war cries sounding during the trading day, and a benign earnings
front, the major ETF’s were able to muster a rally off of key technical
supports. Volume was the highest in over three weeks, but this figure is undoubtedly
skewed due to the unwinding of positions. 

Since our last report, the lateral trading ranges
were broken slightly as both the DIA’s and SPY’s tested their 38% Fibonacci
retracement levels off the October lows. Supports have held thus far, but now
the QQQ’s and the semiconductor HOLDR
(
SMH |
Quote |
Chart |
News |
PowerRating) which had led on the way up are
showing an unwillingness to take charge. Keep your eyes focused on the semis
especially as they’re acting unusually weak in relation to the other
indices. 

 The 
(
$VIX |
Quote |
Chart |
News |
PowerRating) and the
(
$VXN |
Quote |
Chart |
News |
PowerRating) both finished the session lower, with the VIX producing a
CVR II Buy signal. Today’s rally off
technical support gives the bulls a little breathing room over the weekend, but
that’s about the extent of it. The past week has shown a divergence in the two
volatility indices which is a bit of a concern for me. A New Years resolution by
the VIX, in which it promises to follow the VXN downwards would be nice, as
equity prices would most likely be appreciating in value in this scenario. But,
even though today’s action in these two indices would point down this happy path
I am waiting patiently for more clues. The next move, once the Generals show up
to act in force, possibly not until after the holidays, will make for good
hunting, as elephants can’t hide behind trading ranges forever. Have a good
weekend.

 

Points of Significance:

Volatility Index	Close	Net Change	Signals/Direction	% Above/Below 10 Day Moving Average	Significance
VIX	31.05	Down -3.50	   CVR II Buy	1.1% Below	Not at Extreme
VXN	48.18	Down -1.29	   None	3.7% 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 and / or
technical situations,
reflecting increased speculation of a potential price move.

Name	Symbol	Net % Change	Volume	Avg. Volume
Smith InternationalÂ	SII	       +5%	2188	583
Teleabras HOLDR’s	TBH	       +6%	10,494	1,291
Medtronic	MDT	       +2%	4742	1224

 

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
Cognizant Technology	CTSH	52.4	47.9	74.8	45.9

 

Spike Down

Name	Symbol	IV	Previous IV	High IV	Low IV
PEC Solutions	PECS	65	71.6	85	61
Int’l Flavors	IFF	30.7	34.3	41.4	23.3

 

Please use stops on every trade!