Wednesday’s Options Alerts

• June 18, 2002
• TradingMarkets Editors

After yesterday’s big gains, not much
follow through occurred as the major indices hovered around the unchanged mark
today. Both the Dow
(
$INDU |
Quote |
Chart |
News |
PowerRating) and S&P
(
$SPX.X |
Quote |
Chart |
News |
PowerRating) showed very modest
gains, while the Nasdaq
(
$COMPX |
Quote |
Chart |
News |
PowerRating) dropped 10 points.

On the economic front,
much improved house starts and low inflation failed to spark a rally. May
housing starts jumped 11.6% to 1.733 million, besting the 1.60 million the
economists were expecting. The May CPI was flat, while economists expected a 0.1 %
increase. Reports of another suicide bomber in Jerusalem again sparked some
fear.

Tech stocks dragged down the tech sectors after Morgan Stanley lowered
IBM’s
(
IBM |
Quote |
Chart |
News |
PowerRating) second quarter revenues and earnings targets. Internet stocks
posted small gains after Amazon.com
(
AMZN |
Quote |
Chart |
News |
PowerRating) announced free shipping on orders
of at least $50. This was down from $99. After the close, enterprise software
maker Oracle
(
ORCL |
Quote |
Chart |
News |
PowerRating) reported fourth quarter earnings and revenues that
topped estimates. Futures are up afterhours. For more information on today’s action, please refer to
the market
recap.

Not much happened on the volatility
front today. The VIX
(
$VIX.X |
Quote |
Chart |
News |
PowerRating) gapped up, opened
near its highs, and closed near the lows of
the day, right on its 10-day moving average. This shift
in intraday sentiment shows a decrease in fear. No CVR signals were triggered
today. The VXN
(
$VXN.X |
Quote |
Chart |
News |
PowerRating) opened near its highs and closed slightly below
its open. This shift in intraday sentiment also shows a
decrease in fear. The VXN didn’t trigger any signals either.

Points of Significance:

Best Buy
(
BBY |
Quote |
Chart |
News |
PowerRating) dropped almost 6% on
five times its average volume. The company reported first quarter
profits that beat expectations, but warned that its second quarter profits could
be below expectations. Its news also put a ripple effect throughout the retail
sector.

Martha Stewart Living
(
MSO |
Quote |
Chart |
News |
PowerRating)
dropped 4% on triple its average volume. The shares have come under heavy
pressure recently after reports that allege Martha Stewart took part in insider trading
of Imclone
(
IMCL |
Quote |
Chart |
News |
PowerRating) stock. The stock is forming a small triangle. This could
be a potential straddle or strangle play.

Intuit
(
INTU |
Quote |
Chart |
News |
PowerRating) gained over 3% on
double its average volume. The shares continued its push to another 52-week
high. Intuit has been one of the top performers in the software sector. Its
implied volatility is also somewhat low. Look for long call opportunities on
pullbacks.

Abnormal Options Volume With Price Movement
—
Abnormal options volume (calls and puts) with stock price movement

Stocks With Biggest Spikes in Implied
Volatility — Stocks with biggest increases or decreases in implied
volatility compared to previous day

Spike Up

Spike Down

Please use stops on every trade!