Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Compaq -- Ignore unavailable to you. Want to Upgrade?

To: hlpinout who wrote (88733)	1/9/2001 7:16:23 AM
From: hlpinout	Read Replies (1) \| Respond to of 97611

Options Report: Volatility Rises As Stocks Keep Falling Updated: Monday, January 8, 2001 03:30 PM ET Email this article to a friend! Printer-friendly version By Kopin Tan Of DOW JONES NEWSWIRES NEW YORK (Dow Jones)--Volatility climbed as stocks slid Monday, with investors again fretting about corporate growth and the slowing economy. The Chicago Board Options Exchange's Market Volatility Index, or VIX, which measures certain Standard & Poor's 100 option prices to determine investor sentiment, rose 2.74 to 34.77, well above its recent range of between 20 and 30. Also called the options market's fear gauge, VIX typically rises to indicate that traders are getting uptight about the market. In recent instances, VIX has retreated after hitting a high around 35, suggesting a possible correlation to where the implied trading bottom may be. Meanwhile, options put/call ratios remain neutral. The CBOE's index put/call ratio hovered above 1.50 earlier in the session - for the second time in the recent three sessions - which contrarians take to be a somewhat bullish indicator (even as they say it could be higher). The ratio has since fallen to neutral territory. Options traders held back. Investors continued to sell call options to hedge against declining stock prices, particularly in technology names. For instance, in Compaq Computer Corp., whose stock edged down 2.9% recently to trade just above the 52-week low, the February 15 calls traded briskly with investors writing or selling these calls to collect the option premium. Compaq recently fell 48 cents to $16.19. More than 8,000 contracts of the in-the-money February 15 calls were traded - compared with open interest of just 750 - with the volume captured evenly by the Pacific Exchange and the CBOE. The calls most recently lost $1.10 to $2.40 at the Pacific Exchange. Meanwhile, options trading is mixed, with no clear consensus on which way stocks are headed. Take the pharmaceutical heavyweights, which have held steady as other stocks suffered. In Schering-Plough Corp., an investor bought bearish, far out-of-the-money put LEAPs - or long-term options - that expire in January 2002. The pharmaceutical giant recently gained $1.19 to $52.44. The January 35 puts that expire in 2002 gained 6 cents to $1.44 on Pacific Exchange volume of 5,950 contracts, while another 3,350 contracts traded at the CBOE. Composite open interest was 1,351. However, in Johnson & Johnson, an investor executed an apparently bullish trade, selling just out-of-the-money put options that expire in July. Johnson & Johnson on Monday lost 19 cents to $97.69. The July 95 puts lost 63 cents to $6.38 on CBOE volume of 2,000 contracts, compared with open interest of 1,032. Elsewhere in the options market: - Has the Internet sector reached a bottom? Is Yahoo! headed for a bounce? More options investors seem to think so (although contrarians, naturally, disagree). Looking at the options open interest - or total number of outstanding contracts - Schaeffer's Investment Research noted that the composite put/call ratio for the sector is at 0.42, its lowest in the past 12 months. Yahoo!'s individual put/call ratio also has dropped dramatically in recent weeks. However, contrarians - including Joseph Sunderman, Schaeffer's manager of research and development - take an opposite view from the market's implied bullishness and are looking for lower prices. Yahoo! is due to report earnings on Wednesday. - In Philip Morris Cos., an investor who was selling stock - likely to take profit after the recent run-up in stock price - also sold out-of-the-money put options that expire in June. The trade allows the investor to continue to maintain a bullish position in the tobacco giant. Philip Morris on Monday gained $2.13 to $42.25. At the American Stock Exchange, the June 40 puts edged lower 75 cents to $3.38 on volume of 8,021 contracts, compared with open interest of 5,723. - The CBOE's equity put/call ratio was 0.55. The ratio traditionally is interpreted as a contrarian sentiment indicator, which holds that if too many traders are bullish, then the smart approach is to be bearish. Using this contrarian criteria, the index historically has been considered a bullish sentiment indicator if it is around 0.75 to 1; neutral from 0.40 to 0.75 and bearish if it is below 0.40. - The CBOE's index put/call ratio was 1.25. This ratio also is interpreted as a contrarian sentiment indicator. Therefore, the index is seen as bullish if the ratio is 1.5 or higher; neutral from 0.75 to 1.5 and bearish if it is below 0.75. -By Kopin Tan, Dow Jones Newswires; 201-938-2202; kopin.tan@dowjones.com