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by 12/13/2000 9:19 AM
Stocks quoted in this article:
It will be interesting to watch to see if Phillip Morris (MO - 38-5/16) gets a boost from the seeming victory of George W. Bush in the Presidential race. Because MO goes ex-dividend today, the shares theoretically start the day's trading about 50 cents below yesterday's close. A number of MO call options saw heavy volume yesterday. The influx in volume is likely part of a complex arbitrage strategy implemented to collect the dividend on MO. <
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by 12/13/2000 9:18 AM
Stocks quoted in this article:
With a George W. Bush victory in the presidential election nearly assured, it will be interesting to watch the reaction in tobacco stocks today. The AMEX Tobacco Index (TOB - 275.02) has continued to quietly trend higher along its 10-day and 20-day moving averages for the past two months. The index has added nearly 85 percent from its March low.<
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by 12/13/2000 9:18 AM
Stocks quoted in this article:
Internet consulting company Razorfish (RAZF - 3-3/32) guided Street earnings estimates lower yesterday, after the closing bell. The Street had expected RAZF to post profits of two cents per share in the fourth quarter. The company now expects a fourth-quarter loss of 17-to-22 cents per share, excluding items in the quarter. In pre-market activity, RAZF was trading at 2-1/4.

The RAZF July 5 call saw heavy volume yesterday ahead of the news. Just over 10,000 contracts changed hands on the option. Most of the volume was comprised of a series of block trades that changed hands at the bid price of 5/8. These trades may have been initiated as call-writes, in which the trader is betting that the shares will remain below five dollars at July expiration.
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by 12/13/2000 8:56 AM
Stocks quoted in this article:
Microsoft (MSFT – 58-3/8) confirmed early this morning that its is in a multi-year deal with video game manufacturer Electronic Arts (ERTS - 41-11/16). ERTS will develop up to 10 titles for MSFT's video game console Xbox, due for release next fall. Ahead of the news, ERTS shares posted an almost five-percent gain in yesterday's regular session and look poised to open higher this morning.

On the options front for ERTS, the soon-to-expire December 40 put is the site of peak open interest, with 708 contracts currently open. Looking ahead to the January series, the 57-1/2 call is currently the site of peak open interest with 1,974 contracts. The near-the-money January 40 put is the second-most active, home to 1,081 open positions. The January 45 call has 1,062 open contracts in residence.

Looking at implied volatilities on the out-of-the-money December 45 call and the out-of-the-money December 40 put, it is evidenced that puts have been in greater demand of late. The call's implied volatility stands at around 130 percent, while the implied reading on the put position weighs in at 196 percent. Both compare with a 10-day historical volatility on the stock of about 75 percent. This notable pessimism from the options crowd bodes well for the equity's short-term outlook, in our contrarian view.
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by 12/12/2000 5:19 PM
Stocks quoted in this article:
Today, the National Association of Purchasing Management (NAPM) released its semi-annual survey of expected economic conditions. Overall expectations are mixed for 2001. NAPM said that manufacturing revenue should grow by 4.4 percent next year, up from 4.0 percent this year.

The expectation of continued growth stands in opposition to critics of the Federal Reserve who say the interest rate hikes over the last year have slowed the economy to the brink of recession. However, only 29 percent of survey respondents see an increase in capital investment by manufacturing firms next year, while 32 percent see a decrease.

This subdued outlook comes on the heels of the year 2000 where capital investment grew only 4.9 percent, its smallest increase since 1991. Another negative is the recent drop in operating capacity. Manufacturers reported operating at 82.2 percent of normal capacity, down from 87.4 percent from six months ago, its largest decline since 1985.

One positive sign is that manufacturers see very little in the way of price increases for 2001 and also see the economy becoming stronger during the second half of the year.<
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