Volatile Backdrop
There will most
likely be no decision from the federal court judge today, ruling on the validity
of the hand-count going on in Florida. This means that we will have a decision
tree to deal with when it comes to determining who will be the nation’s 43rd
president. That decision tree has a number of branches that includes the very
strong possibility of protracted litigation in Florida and recounts in as many
as six other states. One way or the other, uncertainty may engulf the markets all
week and possibly all month… With this in mind, we would look for cheap bull
vertical spreads, to get ready for a “settlement” rally. This morning’s
miserable earnings release from Hewlett-Packard caused a large jump in the
activity HWP options.
HWP call sellers slightly outpaced buyers.
Options players should look for increased
volatility in the options technology sector. Pre-open activity in the overall
market showed 70% of
the put orders tilted towards buying, and 70%
of calls toward selling.
Our pre-bell
leaders in terms of volume looked familiar: INTC,
SUNW, CSCO, MSFT and HWP.
HWP
continued to be more active than usual as the marketplace tries to digest
continued grim news in the technology sector. After
the first hour of trading in the overall market, call trading reversed to show
exactly 70% buyers. Put buying slowed down to be even with buying. Our volume
leaders show EMC and JNPR joining HWP, with call buying being predominant.layout-grid-mode:line”>
The customer order flow is running
higher to the buy side, now, grabbing premium at
any cost. There will be special situations throughout this messy
period, and every bit of information from the world of politics will rattle the
markets. As I stated above, we may not see a settled market through expiration
and beyond. We would be very watchful for sharp moves based on the political
news releases (these strongly favor the
upside right now) and we would not look to short any volatility through this
period.
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