Tuesday’s Options Alerts

• June 3, 2002
• TradingMarkets Editors

The markets started the week off on a
negative note as the resignation of Tyco’s
(
TYC |
Quote |
Chart |
News |
PowerRating) CEO, the suicide of El
Paso’s
(
EP |
Quote |
Chart |
News |
PowerRating) treasurer, and some lukewarm comments about the software and brokerage
sectors put investors in a selling mood. The release of the May ISM numbers did
initially spark the markets, but quickly evaporated. The May ISM number came
in at almost a two-year high, jumping to 55.7% from April’s 53.9%. 

The Dow
(
$INDU |
Quote |
Chart |
News |
PowerRating) gave up 2.2% today, breaking its 9800 support level, and is now at a
four-month low. Other major indices such as as the S&P 500
(
$SPX.X |
Quote |
Chart |
News |
PowerRating)
dropped over 2.5% today and fell to a nine-month low. The Nasdaq
(
$COMPQ |
Quote |
Chart |
News |
PowerRating) was the weakest
today, giving up over 3.3%, thanks in part to the software and
semiconductors. The only sector in the green today was gold
(
$XAU.X |
Quote |
Chart |
News |
PowerRating). Other
than that, the only positive thing today was that the decline was on below-average volume. For more information on today’s action, please refer to
the
market
recap.

Fear shot up today as the VIX
(
$VIX.X |
Quote |
Chart |
News |
PowerRating) opened
near its low and closed right on its highs. The was the biggest range in well
over a month. This shift
in intraday sentiment shows a big increase in fear. A CVR 3 buy signal was triggered
today. The VXN
(
$VXN.X |
Quote |
Chart |
News |
PowerRating) opened near its lows and closed near the highs of
its range. This shift also shows an increase in
fear. No CVR signals were triggered by the VXN. Fear did die down today
on the back of the economic reports, however the markets gave back the
lion’s share of the day’s gain to close near the lows of the day. Fear is
back in a big way today as today’s news has put more uncertainties in the
market. With selling intensifying towards the end of the session, we
could see more selling at least in the open.

Points of Significance:

Alpharma
(
ALO |
Quote |
Chart |
News |
PowerRating) fell over 13% on
more than triple average volume. The company was hit with two pieces of news
today. First, The United States District Court for the District of New Jersey
has dismissed a class action lawsuit alleging improper revenue recognition.
Second, the company is under SEC investigation related to its revenue
recognition practices in connection with previously reported results in 2001.
There is somewhat heavy activity in the July and September 20 calls.

Xilinx
(
XLNX |
Quote |
Chart |
News |
PowerRating) dropped 12% on
triple its average volume and was the biggest loser in the semiconductor index
(
$SOX.X |
Quote |
Chart |
News |
PowerRating). The shares came under heavy pressure after the company provided
a disappointing forecast. There is heavy activity in the July 25 puts.

Ticketmaster
(
TMCS |
Quote |
Chart |
News |
PowerRating)
gained over 2.5% on over four times its average volume. The stock is trading
in a head-and-shoulders top with the neckline at around 21.25. Its implied
volatility is somewhat low, which could be a good time to use put
options.

Abnormal Options Volume With Price Movement
—
Abnormal options volume (calls and puts) with stock price movement

Stocks With Biggest Spikes in Implied
Volatility — Stocks with biggest increases or decreases in implied
volatility compared to previous day

Spike Up

Spike Down

Please use stops on every trade!