Slight Rebound Brings Buyers Back to OptionsÂ
For
the first time in a great many weeks, the day is starting out with call buyers
displaying a modest show of strength. This changes the trajectory of the order-flow trend from that of the better part of this New Year. Put sellers are also staking their claims, especially in the tech
sector. Why the bullish turn of events? Perhaps
because options players are watching carefully Microsoft’s appellate trial
that begins today.
With
a new pro-business presidential administration in place, hopes are running
high that the prior verdict will be overturned. If this is the case,
(
MSFT |
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PowerRating) stock stands ready to boogie…or does it? And
would this move perhaps lift the sagging tech sector on its giant shoulders?
Let’s
say "Softie" does react positively. Are we looking at a move that returns
the software giant 50% of the way back to its pronouncement high of almost
a year ago (north of $114)? Or would it just make it back to the highs for
this month (65 1/16)? That would be a 12% move from here. Not unreasonable?
Look at these two spreads:
The
April 60/65 call spread gives us a chance at 140% return, if we get an 11% move
from here ($6.375) and we have 39 business days. This is out of the money and
will cost you less than $2 bucks.
For
those less confident in the size of the move, but that the stock will
stabilize, the April 55/65 call spread is in-the-money, but you will be
risking triple the cash. I would go with the former, but this is what we came
up with on MS for April.
Volatility
has come in today, as the underlying market remains rather flat. Order flow is
modest today, registering a 1.9 on our scale of 1 to 10, with 2.6 being the
30-day moving average with the exception of some names in the techs, such as
MSFT,
(
SEBL |
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(
NOK |
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(
WCOM |
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PowerRating).
Here
are today’s numbers…
Pre-open
order volume was moderate this morning. Overall, call sellers and buyers were
even at 1:1, while put sellers beat out buyers at 3:2. In pre-bell
activity, [JNPR|JNPR] call sellers outnumber buyers 2:1. [QCOM|QCOM] call buyers showed up leading sellers 2:1. [INTC|INTC] call buyers dominated sellers 2:1, while put sellers trounced
buyers 7:1. MSFT call buyers led sellers 5:4. [ORCL|ORCL] call sellers outnumber
buyers 3:1. NOK call buyers led sellers 5:1.