Thursday’s Options Alerts

  • March 12, 2003
  • Chris Tyler

In today’s session the VIX was
a very well behaved index. You might
recall that yesterday “our children”, the VIX and VXN were starting to
cooperate. On Wednesday, we saw beautiful behavior in the VIX as it tested
levels just outside its trading range highs, and prices not seen since last
October, before reversing back into its trading range. 

With prices in the SPYs and DIAs also
establishing lows through the 84% Fibonacci level before ultimately reversing,
today’s action with intraday patterns developing off the lows is the type of
confirmation that we like to look for in establishing our positions. Fear in the
air, some of the strongest volume of the year, testing, and reversing of
prices…all of the elements of a great trade. Almost. Let’s not forgot our dear
friend the spread, because no matter how good things look, positions always look
much better when spread, cause as the saying goes, “in order to get ahead,
its best to stay spread”.

We did get a gap higher, and then a rally out the
VIX ensued, before it reversed to close back inside its one and one half month
trading range. Was it extreme action. No, but I could swear I saw some eye
“whites” in my scope as I took a shot at the bear. I’m deep in bear
territory with a vertical in the Diamonds. It’s a swing trade that closed well,
but that could all change very abruptly. The one thing I do know is that I’m
staying spread to stay alive deep in bear territory.

 

Points of Significance:

Volatility
Index		 Close Net
Change		 Signals/Direction %
Above/Below 10 Day Moving Average		 Significance
VIX 38.99 Up
+.91		       
CVR I		 7.95%
Above 		Not
at Extreme
VXN 47.36 Up + .33       
CVR I		 3.10% 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
Maxim
Integrated Products 
MXIM		        +2.5% 7649 3134
Morgan Stanley
MWD		        -2% 24367 5391
General Dynamics
GD		        -1% 13012 3776
Smith International SII        -1.5% 5811 765

 

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
Black
Box
BBOX		 53.4 44.6 75 41
OmniVision
OVTI		 89.4 77.6 119 75.3
NetScreen
Technologies		 NSCN 67 61 107.5 58.2

 

Spike Down

None Today.

Please use stops on every trade!