'Expiration' or 'Evaporation'?

Oh, God what a week. In my professional  opinion that is.  A glance at the options market this Friday morning suggests options players have already headed home to recuperate and lick their wounds. Order “flow” is nothing more than a dribble, registering a 1.2 on our scale of 1.0 to 10.0, with 2.1 being the 30 day moving average.  Any players who are in the game today are playing it safe and selling premium. Overall, call selling is witnessing the most activity, but put sellers are out as well. Volatility is up a bit from yesterday, as is expected from the market’s early morning dip, but the dearth of paper is holding vol. levels in check.  Our search engines are picking up some unusual activity in the following names: (GMST | Quote | Chart | News | PowerRating), where call buyers predominate; and (INTU | Quote | Chart | News | PowerRating), where put sellers are out in force.

A glimpse at our open Microsoft spreads, the MSQ April 60/65 Call vertical and the MSQ April 55/65 Call vertical reveals that both lost a bit of ground over this past week’s chaos. The MSQ April 60/65 Call vertical is trading $7/8-$1 and the MSQ April 55/65 Call vertical is trading  $ 2 13/16- $ 3, with MSFT stock currently at  $53 7/8.   When we got in, the MSQ April 55/65 was in the money, and trading at $4 9/16- $4 11/16.  The MSQ April 60/65 was trading at $1 11/16 –$1 13/16.  MSFT stock was at $58

Thus, we lost about 85 cents on the April 60/65 and about $1.70 on the April 55/65. 

But we cull both good news and bad news from this fact. The bad news is that we lost some money. The good news is that we lost a lot less money than we would have had we owned the stock outright. Remember the obvious: nobody wins every time they trade. But Spreads limit risk. Staying Spread is Staying Alive… 

Here are today’s numbers…

Pre-bell order volume was very light this morning. Overall, call sellers led buyers 5:4, while put sellers beat out buyers at 2:1.  In pre-bell activity, (ARBA | Quote | Chart | News | PowerRating) call sellers outnumber buyers 3:1, while put sellers lead buyers 2:1.  (ORCL | Quote | Chart | News | PowerRating) call sellers led buyers 4:3.  (GLM | Quote | Chart | News | PowerRating) call buyers showed up leading sellers 4:1. (CSCO | Quote | Chart | News | PowerRating) call sellers led buyers 4:3.  (AMGN | Quote | Chart | News | PowerRating) call sellers showed up dominating buyers 2:1.

First Hour order volume was light this morning. Overall, call sellers land buyers are even, while put sellers beat out buyers at 5:4.  In first hour activity, (ADBE | Quote | Chart | News | PowerRating) call sellers outnumber buyers 8:1, while put sellers lead buyers 5:3.  (WCOM | Quote | Chart | News | PowerRating) call sellers led buyers 7:2.  (IBM | Quote | Chart | News | PowerRating) call buyers showed up leading sellers 5:1. (EMC | Quote | Chart | News | PowerRating) call buyers led sellers 7:2.  (MSFT | Quote | Chart | News | PowerRating) call sellers showed up dominating buyers 4:1.

Well folks, another expiration is upon us. Keep sending me your burning questions tonys@tradingmarkets.com