CLOSING WRAP-UP: October 24, 2000 Optionetics.com
Nortel (NT) would have done us all a favor if they had just warned a couple of weeks ago, like everyone else. Their shares would probably be trading in the 60’s in stead of at 51, where they are in after-hours on the company’s warning that business is expected to slow in fiscal 2001. Now everyone thinks they see a "chink" in the optical armor and related companies in the industry are being sold down. Today was a rough day if you live in the tech world. National Semi’s (NSM) warning set the Semiconductors off on a decline that eventually took 60 points off of the Philadelphia Semiconductor index ($SOX), or 7.8%. The influence of the ailing semis carried over to take the Biotechs ($BTK) off 2.7%, and the Internets ($INX) off 2.98. Damage to the NASDAQ Composite at the end of the day… 48 agonizing points while we watched the "old world" rally the Dow Industrials ($INDU) 121 points. A more telling figure, though, is probably the 2 point gain in the S&P 500 ($SPX). To keep the broad market flat while the techs got a shellacking is a pretty encouraging sign that the sentiment is going to continue on the positive side (it’s not all that easy to type with your fingers crossed).
The volume was light today compared to levels we got used to last week while we were in the throws of option expiration. On the NYSE, 1.15 billion shares changed hands while maintaining a 15 to 12 margin in favor of advancers. On the NASDAQ, breadth was positive for most of the day until it eventually rolled over in the last hour, ending with decliners ahead of advancers 21 to 18. The CBOE Volatility Index ($VIX) dropped to 25.15 during the morning, and then steadily climbed throughout the remainder of the day to see it close pretty much where it opened, at 26.22. The CBOE Put/Call ratios were getting hanging out at disturbingly low levels in the .40s for the past few days, but today, were restored to more acceptable levels. I’m willing to tolerate a little exuberance for a while, but if it goes to far, I start to get worried. At the close today, the Total Put/Call ratio was at .64, and the Equity Only was .56.
The Amazon (AMZN) numbers couldn’t have been better. They reported a narrower than expected loss, accompanied with positive expectations for next year, revenues that beat the estimates, and they’re sporting much improved gross margins. AMZN shares had a rough day along with the rest of the tech world closing down under 30 in the regular session, but in after hours have traded up to about 33. The most active AMZN Call contract today was the Nov 35, trading 2,065 contracts with open interest of 3,202 and seeing it’s implied volatility increase a modest 5% today.
Compaq (CPQ) reported earnings that beat expectations by a penny, and guidance for 40% earnings growth for 2001, putting on a pretty convincing argument that the company has rounded the corner this year under Capellas. The shares closed the session today at 27, and traded higher in after-hours before settling back down to those levels. CPQ’s Nov 30 Call traded 1,220 contracts today with open interest of 27,725, and the Jan 30 traded just over 3,000 contracts with open interest of 41,865. The IV on those Nov 30s jumped 28% today.
AT&T (T) let the cat out of the bag via the Wall Street Journal this afternoon. The company’s board gave preliminary approval to a plan to break the massive erstwhile broadband giant into 4 or 5 or 55 pieces. The operation is so big, they’ve apparently named it "Project Grand Slam". All I know is that it’s going to be so confusing, I don’t think I want to be anywhere near the options contracts when it all comes down. I can hear the frantic typing to sell all those leaps call spreads all over the country.
Call Volume today was topped by the NASDAQ 100 Tracker (QQQ) Nov 84, with 11,450 contracts traded. Nokia’s (NOK) Jan 32.5 traded 10,426, the Pfizer (PFE) Nov 45 traded over 8,700, and the AT&T (T) Nov 30 traded 8,656. On the Put Volume list, notable entries were the QQQ Nov 73, with 15,525 contracts traded, and a boatload of Nortel Nov strikes all with heavy volume.
Tomorrow morning, we’re going to get the earnings numbers from AT&T and AT&T Wireless (AWE). I don’t think we can count on them to be a calming force ahead of the open. As I finish this up, the NASDAQ futures are down 80 points from where they were when the equity markets closed this afternoon. It’s sure to be an exciting morning.
Have a great evening.
Scott B. Kaye
Market Analyst
Scott@Optionetics.com |
