Overall Market Volatility: The FOMC did indeed raise rates by 25-basis points this past week, with the Fed stating they are content to use “measured” hikes in the future. This news took stocks higher following the announcement on Wednesday, but it has been downhill since then. Disappointing economic news has created selling and traders were not in the mood to hold stocks over a three-day weekend. The Dow ($INDU) fell 0.86 percent for the week, closing at 10,282.83. The S&P 500 ($SPX) declined 0.80 percent to 1,134.43. The Nasdaq ($COMPQ) gave up 0.93 percent to 2,006.66, but did hold above the 2K level. Volume didn’t pick up as much as expected following the Fed announcement and many traders were already out of town when Friday’s employment report was released. Economic data the end of the week was below expectations and though this drops the odds of larger rate hikes, the news also had a bearish affect on stocks. However, second quarter earnings season is just around the corner and this could provide a boost for stocks in July. The fear indices didn’t move a whole lot this past week, with the CBOE Market Volatility Index ($VIX) closing at 15.08, a decline of just 0.72 percent. The Nasdaq Volatility Index ($VXN) came off last week’s lows, rising 4.91 percent to 19.89. Nonetheless, there is not a lot of fear in the market place right now.
HIGH VOLATILITY RANKING 07-02-04
SYMBOL COMPANY
CMX Caremark RX
CZN Citizens Utilities Co
MFE McAfee Inc
KWK Quicksilver Resources
MVL Marvel Enterprises Inc
APOL Apollo Group Inc
JPM J.P. Morgan Chase
SNDK SanDisk Corp
PSFT PeopleSoft Inc
SINA Sina Corp
High Volatility: Shares of SNDK are approaching support at the $20 level. This storage disk maker has a 52-week low at $19, with the stock closing Friday at $20.93. With the company announcing earnings on July 14, the front month IV has spiked much higher than farther out options. In fact, the July 20 put has IV near 75, with the Jan05 20 put sporting IV at just 58. This is a nice skew and traders might want to take advantage of this skew by entering a put calendar spread. The stock could easily consolidated near 20 for the next few months and this means a calendar spread could bring in some nice profits. Of course, the risk is that the stock moves sharply in one direction or the other, leaving the trade with a loss. However, if the stock does stay near 20 the next few months, we could pay off the long option by selling front month puts on SNDK.
LOW VOLATILITY RANKING 07-02-04
SYMBOL COMPANY
XMSR XM Satellite Radio
CCL Carnival Corp
AXP American Express
RDC Rowan Companies
STM STMicroelectronics
MEDI MedImmune Inc
G Gillette Company
TLT iShares Lehman 20+ Yr Treas
KBH KB Homes
IMCL ImClone Systems
Low Volatility: XMSR shares have rallied sharply the last few weeks, rising from $22.50 a share to their closing price Friday at $27.83. Volume has increased during the rally, a sign that the gains should continue. However, when a stock moves straight up, it tends to see some retracement. With IV low on XMSR options, traders might want to look at using strangles or straddles on XMSR. The stock has shown a lot of volatility this past year, easily moving $5 or more in a month’s time. Astute strangle traders can even get in and out of trades to profit from moves in both directions. The company will not announce earnings until mid-August, so as this time approaches, the IV for the stock’s options should increase.
Jody Osborne Senior Writer & Options Strategist Optionetics.com ~ Your Options Education Site Visit Jody's Forum
Market Data 
Markets 
AI
