Wednesday’s Options Alerts

  • January 14, 2003
  • Chris Tyler

Volatility has been
contracting in the ETFs in the form of a multiday trading range since we last
left off. The volatility indices are
matching this action as they’re also coiling up (contracting), akin to a snake
about to strike. Price, pattern, and volume are still suggestive of potential
upside in the ETFs. If volatility can rally out of this pattern, equities have a
much better shot at a successful rally to new highs. This would be similar to
the late November move to our relative highs, but since then the indices have
had additional time to develop more constructive technical action.

As I stated last time, for those whose charts
read differently than my own, or for those who might be seeing the same picture,
implied volatilities are definitely at levels that make for solid directional
plays, rather than executing with stock. Before executing a trade take the time
to see if options are listed, and if they are liquid enough to trade. You might
be surprised by your next move.

The
(
$VIX |
Quote |
Chart |
News |
PowerRating) and the
(
$VXN |
Quote |
Chart |
News |
PowerRating) finished
mixed on the session, but within trading ranges that are currently testing their
November lows. The VIX finished lower on the session by over 3%, while the VXN,
which incidentally has taken out the November low (just barely), held steady, up
.18 on the day.

For additional color commentary and related
options insights
please click on TM’s Nightly
Daytraders Report as yours truly writes both features for TM. And as always
let price and volume be your guide through the markets. Have a good night. 

Points of Significance:

Volatility
Index		 Close Net
Change		 Signals/Direction %
Above/Below 10 Day Moving Average		 Significance
VIX 26.55 Down
-.97		         
None		 5%
Below 		Not
At
Extreme
VXN 41.92 Up +.18          
CVR VI		 4.66% 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
Cardinal
Healthcare 
CAH		       
-0%		 16265 3248
Research in Motion
RIMM		        +4% 1461 722
Exelon
EXC		       
+1%		 4994 326
Microsoft MSFT       
+1%		 120225 43859

 

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
Bed
Bath & Beyond
BBBY		 40 35.5 60 32.5
Zebra
Technology		 ZBRA 46 41.7 64.8 33.1

Spike Down

Name Symbol IV Previous
IV		 High
IV		 Low
IV
Amylin
AMLN		 22.8 25.3 44.6 19.3

 

Please use stops on every trade!