New Year Dings In

Stocks finished off session lows, but this first week back has definitely been a shot across the bulls bow alerting them that gains in 2007 will not come as easily or uninterrupted as they did during the last four months of 2006.

The VIX rebounded by 4% to 12.01, but remains below the 12.80 reading hit Nov. 27 when the indices tumbled some 1.5% the day after Thanksgiving. The put/call readings also remained at a fairly neutral 0.62 for equities and 1.74 on index products. While both of these gauges have turned higher, they are from extreme readings or registering the type of spike associated with panic selling. Whether this proves to be a positive divergence remains to be seen by Jack Steiman. (Just a little joke, people.)

No surprise that among the most active options were Motorola (MOT - commentary - Cramer's Take) and Nokia (NOK - commentary - Cramer's Take) which fell sharply following MOT's earnings warning. Implied volatility across handset and chipmakers rose some 15% on day.

Other active volatility gainers included casino operator Pinnacle Entertainment (PNK - commentary - Cramer's Take) whose IV jumped 15% as shares tumbled 8% after the company made the brilliant decision to announce a secondary offering on the same morning they issued an earnings warning. Don't these guys know how to bluff?

Nvidia (NVDA - commentary - Cramer's Take) found itself on the wrong side of an analyst report, and its shares fell down $2.25 or 6.3% to $33.60, and IV rose 13% on the day.

Volatility decliners included some of the day's few winners, such as Best Buy (BBY - commentary - Cramer's Take) whose IV declined 8% after it reported better-then-expected same-store sales, and Ann Taylor (ANN - commentary - Cramer's Take), whose IV dropped 7% as the stock bounced some 3% after holding the 52-week low of $32 yesterday.

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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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