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To: Pat Hughes who wrote (52291)	8/18/1998 10:07:00 PM
From: djane	Respond to of 61433

TSC article on options. [Heavy put buying -- market should continue up...] Options Buzz: Options Traders Worrying Their Way Through Rally thestreet.com By Dan Colarusso Senior Writer 8/18/98 2:18 PM ET The market's up around 100. It was up about a buck-and-a-half Monday. So everyone's happy again, right? Wrong, especially in the options world, where the Chicago Board Options Exchange volatility index -- the VIX -- has remained high amid a two-day rally. Measured by averaging the implied volatilities in S&P 100 index options' near-the-money strikes, the VIX is among the most widely followed indicators of fear in the market, and its position has caught some traders by surprise while giving options traders a reason to breathe a little easier. "When one of my traders told me this morning that the VIX was still at 29 and change, I was surprised," said R.F. Lafferty options director Jay Shartsis. "But it's a reflection that put-buying remains very high." For most of the summer, the VIX had been lolling around the 17 mark before it spiked to about 33 during last week's carnage, indicating traders were scared, well, VIX-less. Strangely enough, that situation hasn't changed much since the market fell 299 points on Aug. 4. The VIX slid to around 28, and there it has stayed, as stubborn as Teddy Roosevelt. "It really hasn't come in much, it hasn't crunched like it normally would in this kind of movement," said Everen Securities options strategist Rod Jamieson in Chicago. At midday Tuesday, the VIX was down 5.9% but still at 29.24 after closing 31.08 Monday night. If it stays that way through the rest of today's session, it will surprise many. But options traders, who tend to look at things from a contrarian point of view, think the VIX staying relatively high is a good sign for the market, implying that fear is still present and meaning that smart money remains active. It also means that instead of cashing out of long stock positions, traders are buying puts for protection, keeping intact the equity base. When the VIX slides down to 22 -- still 6 points higher than its 52-week low -- that's when they'll begin to worry about complacency So, the high VIX and an equity put/call ratio of 0.67 (0.50 is usually screaming "buy") have traders thinking the upswing of the past two days may have a bit more altitude. "We may be in for a little bit of a bounce," Jamieson said. Shartsis was somewhat more optimistic. "Two factors insure this rally: the way the market held up in the face of Clinton and the ruble yesterday and the fear we see in the VIX and the put/call ratio," he said. "I'll take it at face value."