Excellent Market Action Impresses Options Pros
By Brian Louis
Staff Reporter
1/10/01 1:23 PM ET
thestreet.com
After a lousy start today, the Nasdaq 100 has steadily climbed and was rallying,
leaving some options pros impressed with the positive intraday reversal in tech
stocks.
"The action is absolutely excellent," said Jay
Shartsis, options strategist at R.F. Lafferty
in New York. The strategist thinks the
downside has been exploited and the "action
is speaking very strongly."
"I would not want to be short this market,"
Shartsis added.
The rebound in the Nasdaq 100, or NDX,
came in spite of Wall Street downgrades of some high-profile technology stocks
and ahead of earnings from Yahoo! (YHOO:Nasdaq - news) and Motorola
(MOT:NYSE - news). The NDX rose 19.78 to 2331.18, after trading as low as
2237.45 intraday.
Yahoo! and Motorola are both slated to post earnings after the close.
With earnings season kicking off, Jordan Kahn, of Kahn Asset Management,
said he'll closely watch how companies' stocks react. If companies post lackluster
earnings but their stocks advance, it will signal that the market will have put in at
least a near-term bottom, Kahn said.
Kahn has his core long stock positions hedged with put options, reflecting neutral
positioning. He said in the current market environment he doesn't want to make
a big bet either way.
A put option gives the purchaser the right but not the obligation to sell the
underlying security for a specific price by a certain date. Generally, investors buy
put options to speculate on further downside on the underlying security, or as
insurance against a long position.
Trading in options on the Nasdaq 100 Unit Trust (QQQ:AMEX - news), or
QQQ, was notable as the underlying QQQ advanced $2.25 to $59.50. Call options
prices on the QQQ jumped. The January 60 calls were up 13/16 ($81.25) to 2
1/2 ($250) on volume of nearly 8,500 contracts. |
