Volatility Bounces As Techs Tumble
The market’s sensitivity to news was evident again on Thursday morning, but this
time the story was economic rather than political. Gateway’s big cut by a key analyst
after warnings of lower-than-expected fourth-quarter sales set off an avalanche in tech
stocks, pushing the market into a precipitous plunge. Options players felt strong
reverberations with a marked increase in volatility, but moderate order flow despite the
bad news may suggest some in the market are watching from the sidelines, waiting to see if
this dip is just another pot-hole on the road, rather than the beginning of a major
selloff. Hopes for a year-end rally, while dimming, remain faintly alive.
Remember, typically in a downward market, options volatility rises, while in an upward
market, volatility falls, so what we are seeing here today makes perfect sense.
Pre-open order volume was moderate to slightly heavy today. In the overall market, call
sellers and buyers are even at 1:1, and put buyers are out in force outnumbering sellers
more than 2:1. No big surprises in the top five order volume leaders today as tech
titans took the day:
(
INTC |
Quote |
Chart |
News |
PowerRating) ,
(
MSFT |
Quote |
Chart |
News |
PowerRating),
(
CSCO |
Quote |
Chart |
News |
PowerRating),
(
ORCL |
Quote |
Chart |
News |
PowerRating) and
(
DELL |
Quote |
Chart |
News |
PowerRating). ORCL put buyers made
themselves manifest, leading sellers 3:1.
(
GTW |
Quote |
Chart |
News |
PowerRating) put buyers outnumbered sellers 5:1.
CSCO put buyers came out as well, trumping sellers 3:1.
(
CPQ |
Quote |
Chart |
News |
PowerRating) call buyers
bucked the sector’s trend today, with a lopsided call buy/sell ratio of 9:1.
After the first hour of trading, order volume was remained moderate to above-average.
Overall, call buys outnumbered sells 2:1, while put buys and sells were even at
1:1. Top volume leaders remained nearly the same, with a slight transposition in rank:
INTC,
(
SUNW |
Quote |
Chart |
News |
PowerRating), CSCO, MSFT, and
(
BRCD |
Quote |
Chart |
News |
PowerRating). BRCD jumped into the top tier with call buyers topping
sellers 2:1. INTC call buyers led sellers 4:1, while put sellers outran buyers 3:1.
CPQ call buyers still outpace sellers, but at a more modest ratio of 3:1.
MSFT call buyers are out in force, leading sellers 3:1.
(
DELL |
Quote |
Chart |
News |
PowerRating) put sellers
overtake buyers 4:1.
By now, those readers who have followed this column should be out of their verticals,
but still in possession of some little options. For those of you still long some
cheap puts, this might be a good time to begin scaling out of them. Otherwise,
hunker down and maintain a cool head, as the remainder of this year promises to hold some
more bumps and surprises. If you are still weak on spreading in general, we
suggest reading my accompanying lesson, an Introduction to
Options Spreading.
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