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by 1/18/2001 12:24 PM
Stocks quoted in this article:
Extreme Networks (EXTR - 40-15/16) is lower by over fourteen percent after reporting earnings after the close that met analysts' estimates.

The January 40 put is extremely active, with volume of over 5,000 contracts. It could be put players taking advantage of this huge downside move, as these expirations are set to expire tomorrow.

It is interesting to note that this option was bid 7/8 point at the close yesterday. The option is now bid only 1-1/4, despite the stock trading almost seven points lower. One can take from this that the implied volatility of this option was jacked up ahead of the earnings report, but imploded after the big move occurred. This is a valuable lesson for option players who buy options with short lives prior to a major event like earnings. When implieds are pumped up, the option buyer's risk increases substantially.
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by 1/18/2001 11:06 AM
Stocks quoted in this article:
Cree (CREE – 31) manufactures semiconductor wafer technology that is utilized in products ranging from dashboard lights to video screens. The stock has been named one of Fortune's "fastest-growing companies" and one of Forbes' "best small companies," according to Hoover's Online.

Despite these positive words from the press, the stock has faced technical struggles of late. Since the end of June, CREE has been in a pronounced downtrend, losing nearly 65 percent of its value over the last seven months. This decline has been held in place by the stock's descending 10-week and 20-week moving averages.

Today, CREE shares are enjoying a burst of strength, rising nearly six percent in late-morning trading. This morning, the firm announced plans to repurchase as many as four million of its shares, or about five percent of its common stock.
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by 1/18/2001 10:39 AM
Stocks quoted in this article:
One of America's oldest retailers, Sears (S – 34.50), announced fourth-quarter earnings of $1.91 before the open today, topping the Street's consensus estimate by four cents. Not wanting to bask in the glory of a positive earnings surprise, company officials said that 2001 is setting up to be a particularly "challenging" year, especially the first six months. The retailer said its earnings per share for the year will likely post an increase in the high single digits or low double digits. The stock is trading moderately lower in mid-morning activity.

Technically speaking, the stock has been rather directionless for quite some time. Since late May, S shares have been trending sideways in a range between the 29 and 37 levels. This sideways trajectory has reduced the significance of the equity's moving-average trendlines.

Options activity has been notably anemic on S of late. Not counting the January series (which expires tomorrow), the site of heaviest call open interest is the February 40 call, which is home to only 1,204 open contracts. <
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by 1/18/2001 10:18 AM
Stocks quoted in this article:
On Tuesday, pet food titan Ralston Purina Group (RAL – 31-5/8) shot up nearly 28 percent on extremely heavy volume following news that it was being acquired by international confectioner Nestle. The stock has continued to trend in new high territory throughout this week's trading.

Yesterday, options players got into the mix, actively trading the June 22-1/2 and June 30 calls. 2,300 contracts changed hands at the 22-1/2 strike, while a notable 8,447 contracts were executed on the closer-to-the-money option. Prior to yesterday's trading, the June calls were home to 1,000 and 6,070 open contracts, respectively. Open interest at these strikes now stands at 3,300 and 12,295, indicating that nearly all of yesterday's volume was new positions. A number of large block trades crossed the tape throughout the trading session yesterday. Some were indicated as spread strategies between the two call options.

RAL shares are trading slightly higher today after Bear Stearns initiated coverage with a "buy" rating on RAL's offspring, Energizer Holdings (ENR – 23-7/16). <
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by 1/18/2001 9:33 AM
Stocks quoted in this article:
IBM (IBM – 96-11/16) reported fourth-quarter earnings yesterday after the closing bell. Big Blue offered a pleasant surprise to Wall Street by posting profits of $1.48 per share. This edged past the Street consensus, which called for earnings of $1.46 per share. The company also announced they were comfortable with existing revenue and earnings expectations for the year 2001.

Subsequent to the Fed-inspired rally on January 3, the stock had been consolidating sideways into the site of its 10-day moving average. In after-hours trading yesterday, IBM was trading around 103. It appears likely that the stock will test the 105 area today, an area that acted as resistance on three separate occasions in November and early December.<
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