U.S. OPTIONS/Investors continue to chase calls
CHICAGO, Jan 8 (Reuters) - Investors continued to chase equity calls on Friday amid broad-based
optimism about the prospects for the stock market, traders said.
The S&P 100 closed 3.26 points higher at 636.02, having set a fresh record at 637.34. Other key indices also scaled new peaks.
''People are wildly bullish. We saw very heavy call buying and it's getting to dangerous levels,'' said Jay Shartsis, director of options
trading at R.F. Lafferty & Co.
''We're at the tail end of this bull market,'' he added.
Larry McMillan, president of options advisory group McMillan Analysis, said recent call buying has been the heaviest he has seen since he
began trading options in 1973.
''It's definitely a problem,'' McMillan said of put/call ratios. ''But where does it stop? It can go on like this for a while longer.''
Traders noted that the equity put/call ratio on the Chicago Board Options Exchange, the nation's biggest options exchange, was bearish,
as was the dollar-weighted equity put/call ratio on the American Stock Exchange, the second largest options market.
Shartsis said the Market Volatility Index , which measures implied volatility of several strikes on OEX options, also looked negative with a
close of 23.88, down 0.27 point on the day.
Among individual stock options, implied volatility on Amazon.com Inc. (Nasdaq:AMZN - news) options got crushed into the close, ending
around 130 percent, having spiked as high as 180 percent earlier.
''It was unbelievable,'' said Paul Foster, investment strategist and editor of 1010WallStreet.com. ''Anxiety is high with the stock at these
levels.''
Amazon.com shares ended up 1-3/8 at 160-1/4, after surging to a new record at 199-1/8 and dropping as low as 152.
Foster said he believed stock volatility would stabilize next week.
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