Wednesday’s Option Alerts

• April 1, 2003
• Chris Tyler

Since we last left off the the
SPYs and DIAs have each tested, and held their 50% Fibonacci retracement levels
from the March lows. Today’s action saw a
price gap off of these levels, with the ETFs establishing a tight trend day
higher. All three of the index proxies finished on closely around either side of
the plus one percentage mark. Volume was slightly higher on the NYSE, notching a
day of accumulation, but general trade was probably best described as “a
grind” in Tuesday’s trade.

The albatross continues to hang it’s weight on
the markets. A little bit of fear, i.e. higher VIX and VXN readings, would go a
long way towards being more aggressive in entering longs off pullbacks. The fact
that this isn’t the case raises the caution flag as far as decisions, and still
continues to be the reason for the previously mentioned gamma strategy. With
this strategy in mind, the market has been quite generous in giving solid scalp
opportunities in at least two out of the last three sessions, off of key price
supports, with confirming intraday price setups. What’s next? Nobody knows for
certain, but I do know how to play the odds with what the market is giving us at
this moment in time, and I am also quite certain that the best way to continue
playing it, is by “staying spread to stay ahead”.

The VIX and VXN continue to raise the flag, so to
speak. Closing prices are still testing the lower boundaries on the daily charts, and
a CVR Sell Signal in the VXN still exists as of the close of trade.
As I stated, my own preference is to respect price and volume first, and
volatility second. What this means is that the markets are showing mixed signs
at the moment. These signals are the basis for the fore mentioned strategy, and
what I personally consider to be a smart way to trade around the scared money in
a world filled with conflict and uncertainty.

Points of Significance:

Volatility Index	Close	Net Change	Signals/Direction	% Above/Below 10 Day Moving Average	Significance
VIX	32.10	Down -1.27	       NONE	4.12% Below	Not At Extreme
VXN	41.97	Down -1.08	        CVR VI SELL	6.62% Below	Not At Extreme

 

Abnormal Options Volume — This list
includes both percentage movers that are normally associated with an increase in
options activity, as well as stocks that have unusually high activity and / or
technical situations,
reflecting increased speculation of a potential price move.

Name	Symbol	Net % Change	Volume	Avg. Volume
DigeneÂ	DIGE	       +17%	1095	331
Interdigital Communications	IDCC	       -17%	9772	3823
Altria	MO	       -6%	101388	35900
Michaels Stores	MIK	       -2%	42808	3745

 

Stocks With Spikes in Implied
Volatility — Stocks with Increases and Decreases in implied
volatility compared to previous day. Candidates are then screened qualitatively.
These lists represent those issues that carry a blend of liquidity and/or
technical setups that might deserve further notice. 

Spike Up

Name	Symbol	IV	Previous IV	High IV	Low IV
Altria	MO	67.7	55	51	19.4
Express Scripts	ESRX	38.8	33.2	62.8	33.7

Spike Down

Name	Symbol	IV	Previous IV	High IV	Low IV
Cree Inc.	CREE	64.8	71.3	96	69
United Natural Foods	UNFI	36.8	40.4	56.6	39.7

 

Please use stops on every trade!