Equity Futures Overview - Thursday, April 17, 2003
Equity futures trade slightly higher - fading some of the bounce on decent earnings with the weak payrolls data. Key today will be the Philly Fed number at noon (risk to the downside given high correlation to recent terrible Empire State data). What appeared to be primarily new shorts sending S&P futures lower yesterday, turned out to be largely due to long liquidation, as one stand-out seller yesterday apparently unwound a $550 million notional long position. Our desk had institutional buyers near the day lows buying into the bell. In options, our desk had good sellers of tech option premium into strength, particularly in the SOX Index (Semiconductor Index), where we sold May 320 calls 2000 times for an institution ($64 million notional, roughly equal selling 25,000 SMH options).
Expiration: with SPX options settling on the open today, we could see some volatility just out of the gate as dealers hedge the remainder of their positions, but then no SPX option expiration-related flows for the rest of the day. Some single stocks, however, face pin risk with expiration tonight (stock prices trading within a tighter and tighter range around the particular strike as we approach the close, as market makers hedge their expiring option positions). Based on our analysis of the large outstanding call option open interest near the at-the-money strike, some key names that could be pinned at the following strikes include: AMGN at $60, TGT at $32.5, L at $10, MWD at $45 and a few others.