Volatility Gets Hit In VRTS Options

The National Association of
Purchasing Management
report supported what Alan Greenspan said with his
infamous, “zero growth” statement last week. The lowest reading since March
of 1991 certainly points to an economy that is limping along, rather than one
that’s on the verge of explosive growth and runaway inflation.

As an investor, or trader, you have to realize that rapidly slowing orders, high
inventories, production cutbacks, layoffs and bankruptcies will not end with a
magic bullet from the Fed. The Fed is doing the right thing; the legislature is
about to do the right thing(s) and the market will respond. Keep in mind that
Rome wasn’t built in a day.

Veritas Software
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is seeing some
pretty interesting call volume today. Nearly 7000 FEB 90 calls have traded;
that’s double the volume the entire option class traded two days ago. (CSFB) has
been either crossing the calls or hitting the bids for some customer. The
volatility has been hammered, falling from 100% around earnings a couple weeks
back, to just 70% today.

VRTS broke through its 50-day moving average yesterday, and it looks like the stock
may have a date with 80 in the near future. In any case, the active call seller
is telling us some big player(s) think volatility will shrink and or prices will
go lower.

Another situation that looks interesting is the action in Advanced
Micro Devices

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options. 7500 FEB 27 1/2 calls have traded.
The curious thing is the price they traded at. Most other exchanges were trading
those options for $.70 – .85, but 7344 traded on the Pacific at $.55. Call us
wacky, but it seems like someone got clipped for $.15 7344 times. That’s about
$110,000! Maybe that’s why the PCX has slipped to number 4 out of the 4
open outcry option exchanges.