Tech Takes Center Stage

With little economic data due today and earnings reports not yet beginning in earnest, the consumer electronics convention and MacWorld will garner the lion's share of media attention today.

But aside from those upbeat confabs, keep your eye open for the first wave of earnings warnings that are filtering in this morning, such as the one from Talbots (TLB - commentary - Cramer's Take), which cited weaker-than-expected sales.

Options volume is starting to pick up as investors begin positioning for earnings. While it's too early to get a real read, my feeling is that investors are likely leaning toward buying put protection ahead of earnings. The market seems to have shed some of its Teflon coating, and bad news is getting punished more than good news is being rewarded.

Yesterday's options-trading volume leaders included eBay (EBAY - commentary - Cramer's Take), which saw nearly three puts trade for every call.

RadioShack (RSH - commentary - Cramer's Take) came out of nowhere and raised guidance. I can't remember the last time this beleaguered electronic chain gave an upbeat outlook. Its shares jumped 11% and the implied volatility of its options rose 5% on the day.

Xerox (XRX - commentary - Cramer's Take) saw its IV jump as there was notable buying volume in some of the January out-of-the-money calls on what was cited as takeover speculation.

Gap's (GPS - commentary - Cramer's Take) IV moved 8% higher as the stock rose sharply on reports that the company had hired an investment banker to pursue options. Sounds like there are more $10 shirts in my future.

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Steven Smith writes regularly for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. He was a seatholding member of the Chicago Board of Trade (CBOT) and the Chicago Board Options Exchange (CBOE) from May 1989 to August 1995. During that six-year period, he traded multiple markets for his own personal account and acted as an executing broker for third-party accounts. He appreciates your feedback; click here to send him an email.

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