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Politics : Idea Of The Day -- Ignore unavailable to you. Want to Upgrade?

To: IQBAL LATIF who wrote (15825)	12/20/1997 10:16:00 AM
From: Riskmgmt	Read Replies (2) \| Respond to of 50167

Iqbal, How wonderful to see your postings again, you were sadly missed. How beautiful the mountains must be, getting far from the crazyness of urban living must be the best therapy. What crazyness has happened in your absence, fewer posts and all bearish or cautious. Even the epitome of bulls OJ turned super bear. I read your posts on the markets but I am not clear so please indulge me here. Are you thinking that we have seen the bottom for the techs and will rally from here or that if Microsoft falls we could see more downside? Intel seems to have support around the $69-71 area and it is hard for me to imagine it going much lower, it seems so cheap now. Ditto for Amat and some others. Am I missing something here? regards, Ray

To: IQBAL LATIF who wrote (15825)	12/20/1997 10:28:00 AM
From: Riskmgmt	Read Replies (1) \| Respond to of 50167

Iqbal: Re: Intel and Microsoft-have you seen this? Options Buzz: Options Sentiment Gap May Mean Bad News for Tech Giants By Dan Colarusso Staff Reporter 12/18/97 4:57 PM ET Is the options market trying to say something about tech sector giants Intel (INTC:Nasdaq) and Microsoft (MSFT:Nasdaq)? Maybe, and it may not be good news for the short term. The evidence lies in the open interest figures, where put contracts on January's near-the-money options -- those with strike prices closest to the underlying share price -- are almost twice the call open interest for the same month. A put is a contract to sell a stock at a predetermined price by the third Friday of the month while a call gives an investor the right but not the obligation to buy the stock at a predetermined price by the same Friday. Open interest is the number of contracts outstanding in a particular options series. Among both equity and option players, Intel is serving as a bellwether for a technology-driven economy. The October crashlet and concerns about troubled Asian economies have taken Intel down from the $80 level of late October, and today it was trading at 68 1/8, down 1 1/4. The company's shares have basically bounced around the 70-to-80 range since Oct. 24 before sliding under 70 yesterday. That falloff has been reflected in the options markets. Intel's January 65 calls have open interest of 17,224, while more than 43,000 put contracts are in play at the same strike price. The disparity is almost 7,000 more puts than calls at the January 67 1/2 strike and over 24,000 more puts than calls at the January 70. After Intel broke through what traders call a "resistance level" at 70 yesterday, options analyst Bernie Schaeffer of the Investment Research Institute said the pattern leaves two scenarios to ponder. The first is for the stock to find support somewhere lower -- at 67 1/2 or 65 -- or to take a snowballing tumble to the 50s as put sellers short the stock as a hedge and take share prices further down. Each could have a major impact on the rest of the market, Schaeffer said. "The huge imbalance suggests excessive negative sentiment on the stock," he said. "The odds would favor it finding support" at 67 or 65. If the market can't be supported, however, put sellers have few options. They can have the stock delivered when exercised or short the stock. Shorting, since most sellers are institutional or professional investors, would likely be in somewhat large blocks and spark a slide larger than the company's prospects actually warrant. Schaeffer noted that some of the disparity between puts and calls could be caused by December put positions that have been rolled into January, but said the open interest ratio was similar earlier in December. In Microsoft, open interest on its January 125 puts was 8,640 and just 2,482 in the calls, with a larger gap at the 130 strike price, where puts outnumbered calls 13,905 to 3,180. Microsoft was down 4 to 131 5/8 today. Keep in mind that Schaeffer and his research posse are contrarians, normally betting against the larger open interest signals the options market sends. But because of Intel's importance to the overall market, the equation is somewhat skewed. Intel hasn't traded under 70 since July. They typically figure the crowd is wrong, or at least late, but the size of the crowd is what gives the Intel theory teeth. Prime Charter's Peter Bisani said he sees the chance to profit from the technology slump in early 1998 by writing, or selling, puts on traditionally strong stocks, taking in a premium when the contract is sold, and possibly getting access to the stock at a temporarily depressed price. "It doesn't make any sense to lay out huge amounts of cash" to buy certain stocks outright at this point, he said. Schaeffer also has been a proponent of selling puts on traditionally stable stocks. The risk to writing puts is that the options seller gets the stock before it hits bottom and rides it down further, making a comeback more difficult. Thought? Ray