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by 12/20/2000 11:33 AM
Stocks quoted in this article:
I find it unbelievable that today's intraday bounce in the S&P 500 March Futures (SP/H1- 1299.00) has given traders the courage to bid up Yahoo! (YHOO – 27-1/2). After all the concerns about pullbacks in Internet advertising spending, it seems people still want to bid up their favorite Internet darlings. This stock has fallen 80 percent in four months.

Our Schaeffer's put/call open interest ratio (SOIR) for YHOO ranks in the 0.0 percentile. In fact, yesterday it sported its lowest put/call reading in the past 12 months. This indicates an extreme lack of fear among Internet stock investors. <
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by 12/20/2000 9:57 AM
Stocks quoted in this article:
Yesterday, after the market closed, Foundry Networks (FDRY – 15-13/16) pre-announced fourth-quarter earnings. The manufacturer of network switching and routing equipment expects its earnings to fall into the 11-14-cents per share range. Analysts had been expecting 24-cents per share. The announcement came as a result of the impact on FDRY of reduced capital spending by the communications infrastructure sector. Knee-jerk reactions to the news had the shares trading as low as 15-1/4 in extended hours last evening. The company had its initial public offering in September 1999 and was one of the most successful launches of that year. It may now be trading back in the range of its original price.

Four Wall Street analysts have stepped forward today. Three issued downgrades on the stock while one maintained his rating. The tally currently stands at 15 "buys" or better and four "hold" ratings for FDRY.

Short interest on FDRY more than doubled to 4.2 million shares over the most recent reporting period. Based on the 30-day average trading volume for the shares, this yields a short interest ratio of just 0.95.

On the options front, traders have configured themselves rather bullishly. The current Schaeffer's put/call open interest ratio (SOIR) for options with up to three months of life left stands at 0.24. This means that there are just 24 open put positions for every 100 open call positions.
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by 12/20/2000 9:41 AM
Stocks quoted in this article:
Eurodollars March Futures (ED/H1 – 93.99) were up eight ticks in pre-market trading. With the contract trading at 93.99 (100-93.99 = 6.01%), the price appears to now be factoring in two interest rate cuts. The current Fed Funds rate is 6.50 percent.

Also, note that the S&P Futures (SP/H1 – 1303.00) and Nasdaq Futures (ND/H1 – 2344.0) traded lower. This is also not surprising, as the discrepancy between what the market wants, (a rate cut), and what the Fed is doing so far (not cutting rates), is becoming more apparent. The market is suggesting that the longer the Fed waits, the more pain we can expect.
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by 12/20/2000 9:27 AM
Stocks quoted in this article:
Shares of Verizon Communications (VZ – 51-7/8) declined over seven percent yesterday in a sell-off aided by an earnings warning from industry competitor SBC Communications (SBC – 46-9/16). The decline took VZ below its 10-week moving average, which had been providing a measure of support for the shares during a modest rally since early October.

From a longer-term technical perspective, the recent move to the upside in VZ stalled at its overhead 20-month moving average. In yesterday's trading, it appears that an institutional player rolled out a position in the January 40 put to the February 40 put.<
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by 12/20/2000 9:27 AM
Stocks quoted in this article:
The list of companies with earnings difficulties continues to mount. Yesterday, circuit-board manufacturer Merix (MERX – 12-5/16) reported earnings that were in line with expectations, but guided Street earnings estimates for the third-quarter lower. The consensus was for the company to report earnings of 69 cents per share. MERX now expects to earn between 44 and 48 cents per share. In response to the news, MERX declined over 50 percent.

Option activity centered on the January 10 put. In a series of large block trades, approximately 6,000 contracts traded on the option at a price of 1-1/8 per contract. Virtually all of the volume translated into new open interest.
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