Wednesday’s Options Alerts

  • January 28, 2003
  • Chris Tyler

The VIX closed down 10% in
Tuesday’s trade, triggering fresh CVR II,III, and VI Buy signals. The
index closed above prior resistance on the daily chart, ahead of the all
important State of the Union Address by our fearless leader. The ETFs all
finished in the green, establishing inside days in both the SPYs and the DIAs,
with the QQQs slightly surpassing the prior day’s high (we’ll take that as a
positive).

Technically speaking, we have defined support
levels from which to exercise our decision to trade, as the both the SPYs and
DIAs are holding between the 50 and 62% Fibonacci retracement levels, while the
QQQs have held above the 50% mark. The VXN remains a bit of an enigma. Even
though the Nasdaq has faired better as of late, the VXN, while off of its lows,
has still yet to turn in a performance that would suggest
“fear”. 

Keep to discipline, and to use a quote from Tony
Saliba, “to stay spread, is to stay alive”. There’s an options
strategy for every type of market, it’s our job to find which one fits the
individual situation best. We left off last with the suggestion of selling extra
premium against long contracts in high implied volatility stocks, or possible
bull put spreads on evidence of price support. So far so good, but regardless of
the outcome, we know that by staying spread the edge is on our side.

Points of Significance:

Volatility
Index		 Close Net
Change		 Signals/Direction %
Above/Below 10 Day Moving Average		 Significance
VIX 36.05 Down
-3.72		         
CVR II,III,VI 		 12.79%
Above 		At
An
Extreme
VXN 46.70 Up +.10       
 None  		 5.7% Above 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
BP
P.L.C. 
BP		       
+3%		 6710 2895
Eastman Kodak
EK		        -2% 16744 6386
Cognizant
Technology
CTSH		       
+0%		 8117 2623

 

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
Intuit
INTU		 47.7 42.2 65.4 42.1

Spike Down

Name Symbol IV Previous
IV		 High
IV		 Low
IV
Cognizant
Technology
CTSH		 44.5 53 75 45.9
Affiliated
Computer Service		 ACS 45 50.6 70 35

 

Please use stops on every trade!