Thursday’s Options Alerts
As expected, the
Fed left the
overnight Fed funds rate at the 40-year low of 1.75%. But the real damper was
Worldcom‘s
(
WCOM |
Quote |
Chart |
News |
PowerRating) revelation of a $3.8 billion accounting fraud,
news that was a huge damper from the start. The Nasdaq
(
$COMPX |
Quote |
Chart |
News |
PowerRating) violated their
September lows while the S&P 500
(
$SPX.X |
Quote |
Chart |
News |
PowerRating) came within 8 points of
breaching their September lows.
The markets did try a valiant reversal early on,
but that failed. It wasn’t until the final hour of trading that the markets
staged a major reversal. At one point, the Dow
(
$INDU |
Quote |
Chart |
News |
PowerRating) was off over 200
points, but finished with a loss of only 6.71 points. The S&P
(
$SPX.X |
Quote |
Chart |
News |
PowerRating)
fell 2.62 points while the Nasdaq
(
$COMPX |
Quote |
Chart |
News |
PowerRating) closed up 5.44 points. Worries
about the economy, corporate profits, accounting irregularities, as well as
terrorism has had investors on edge in these trying times, however the market’s
ability to shrug off negative news from Worldcom today is a positive sign. As
always, follow through tomorrow will be key. For more information on today’s action, please refer to
the market
recap.
Volatility screamed higher today in
the morning, reaching levels not seen since last November, but sold off near the
close. The VIX
(
$VIX.X |
Quote |
Chart |
News |
PowerRating) gapped up, opened its mid point and closed near the
lows of the day. This shift
in intraday sentiment again shows a big decrease in fear. Today’s action
triggered a CVR 1 buy signal. The VXN
(
$VXN.X |
Quote |
Chart |
News |
PowerRating) also screamed higher
today as gapped up, open near the midpoint of its range, and closed near the highs of the day.
This shift in intraday sentiment
also shows a rise in fear. The VXN triggered a CVR 3 buy signal today.
Points of Significance:
America Online
(
AOL |
Quote |
Chart |
News |
PowerRating) dropped
11.50% on more
than double its average volume. The shares were under heavy selling pressure
today as speculation that the company will issue a profit warning ran rampant.
Shares of AOL have fallen to a level not seen since October, 1998.
Bausch & Lomb
(
BOL |
Quote |
Chart |
News |
PowerRating)
dropped over 10% on more than four times its average volume. The shares broke
down from a month-and-half long base today as the company lost a patent
infringement case. Bausch & Lomb does plan to appeal the
case.
EchoStar Communciations
(
DISH |
Quote |
Chart |
News |
PowerRating)
fell almost 10% on
over triple its average volume. The shares are breaking down from a big-picture descending
triangle on its weekly chart. Its implied volatility is almost doubled its six-month historical volatility. Look for opportunities in short volatility
strategies.
| Volatility Index |
Close | Net Change |
Signals/Direction | % Above/Below 10 Day Moving Average |
Significance |
| VIX | 32.33 | UP 0.86 |
CVR 1 BUY |
7.51 % Above |
Not At Extreme |
| VXN | 64.14 | UP 4.26 |
CVR 3 BUY |
11.62 % Above |
Not At Extreme |
Abnormal Options Volume With Price Movement
—
Abnormal options volume (calls and puts) with stock price movement
| Name | Symbol | Net % Change |
Volume | Avg. Volume |
| America Online |
AOL | – 11.49 |
44045 | 6900 |
| Bausch & Lomb |
BOL | – 10.19 |
1122 | 301 |
| Echostar Communications |
DISH | – 9.38 |
2580 | 672 |
| Electronic Data Systems |
EDS | – 6.92 |
28059 | 2500 |
| IGEN Interantional |
IGEN | – 6.06 |
3050 | 168 |
| L-3 Communications |
LLL | – 5.79 |
6649 | 361 |
Stocks With Biggest Spikes in Implied
Volatility — Stocks with biggest increases or decreases in implied
volatility compared to previous day
Spike Up
| Name | Symbol | IV | Previous IV |
High IV |
Low IV |
| SuperValu Inc. |
SVU | 42.1 | 25.8 | 31.7 | 22.1 |
| Martha Stewart Living |
MSO | 131.9 | 99.7 | 77.8 | 37.9 |
| Regions Financial |
RF | 28.4 | 22.1 | 24.4 | 14.2 |
| America Online |
AOL | 74.9 | 58.5 | 54.6 | 43 |
| Grupo Televisa |
TV | 43.2 | 34.2 | 40 | 31.6 |
| Charter One Financial |
CF | 24.9 | 19.8 | 33.8 | 17.4 |
Spike Down
| Name | Symbol | IV | Previous IV |
High IV |
Low IV |
| AT&T Canada |
ATTC | 28.2 | 46.9 | 70.2 | 15.1 |
| Digene | DIGE | 99.7 | 120.8 | 83.2 | 40.2 |
| American Water Works |
AWK | 11.1 | 12.5 | 15.7 | 8.7 |
| Willis | WSH | 27.9 | 31 | 35.1 | 29.3 |
| New Plan Excel Realty |
NXL | 17.3 | 19.2 | 22.5 | 16.9 |
| Hudson City Bancorp |
HCBK | 26 | 28.8 | 24.9 | 20 |
Please use stops on every trade!