Monday April 26, 3:09 pm Eastern Time
US OPTIONS/AOL vols firm into earnings, calls busy
CHICAGO, April 26 (Reuters) - Implied volatility stayed firm in options on America Online (AOL - news) on Monday, with out-of-the-money calls garnering the lion's share of interest as the market waited for the Internet service provider's earnings on Tuesday.
Implied vol for 155 calls and puts each stood at about 88 percent early Monday afternoon, slightly below Friday's 90-percent level but above the three-month average at 81 percent, said Elliot Spar, senior options strategist with Gruntal & Co.
''They've (implied volatilities) come down a little bit but they are still high,'' said Scott Fullman, chief options strategist, Swiss
American Securities.
Calls proved more popular on Monday than puts, with call volume in the May 160 - 200 strikes at the Chicago Board Options Exchange totaling more than 15,200 contracts by 1317 CST/1817 GMT compared to just over 1,400 puts across the same strikes.
The stock traded up 9-1/2 at 156-1/2 at 1343 CST on Monday.
Some pundits said the market was setting up for a possible upside surprise in AOL's fiscal third-quarter earnings. First Call's consensus estimate looked for $0.09, but some noted a ''whisper'' number of $0.12 per share.
''The thing is, if it (earnings) comes in disappointing, the stock could get hammered,'' added Fullman, who said the already high implied vols then likely would pop up well above the 100-percent level.
Spar said his company has recommended longs retreat before earnings in the AOL issue, which has rocketed upward since early last week.
''The stock's run up better than 40 points since last Tuesday,'' he said. ''We're telling people to lighten up (longs).''
He also pointed to some bearishness reflected in the combined equity and index put/call ratio on Monday, which had risen to about 0.38.
''It's been in the 30s all day,'' he said. ''I see that as a negative.''
But Fullman added that the Standard & Poor's 100 (.OEX) put/call ratio alone was ''overly bullish,'' standing at 2.26 compared with the more-typical range of 100-150. |
