Options Volatility Eases in Light Trading
Kevin Burke
04/26/01 - 03:24 PM EDT
Despite several big-name earnings still on deck, volume on the major options exchanges was pretty modest Thursday and volatility eased.
Implied volatility measures continue to come down after a brief uptick earlier this week. The
Chicago Board Options Exchange Volatility Index fell 5.2% to 29.63 around midday. Some traders are saying that although fear is subsiding, investors are still hung over from last week's rally, so volume is decidedly lower.
| Volatility Index |
| Today | % Change |
| 29.79 | -4.7% |
| Source: ILX |
According to Paul Foster of
1010WallStreet.com , "Volatilities are coming down more rapidly than stocks are going up, so there is little opportunity to make money. For instance, if you bought calls of
Intel(INTC Quote) last week you would have needed the stock to move up a bit more in order to turn a profit."
| Nasdaq Volatility Index |
| Today | % Change |
| 73.87 | -7.3% |
| Source: ILX |
Intel, meantime, is scheduled to discuss its outlook for 2001 on an afternoon conference call. Activity in Intel options was fairly modest, with exception of the May 27 1/2 puts, which traded nearly 3,700 contracts on an open interest of 16,679. Premiums on those puts were listed at $1.10 on the CBOE. Intel call volume was lackluster.
Shares traded up 86 cents, or 3% to $29.89 in recent trading.
On the Q-tip, everybody's favorite hedge play, the
Nasdaq 100 Unit Trust(QQQ Quote) was somewhat active.
The May 46 calls traded roughly 8,000 contracts on an open interest of 64,415. On the flip side, investors were also chasing the May 46 puts with about 7,000 contracts traded on an open interest of 26,660. The tracking stock itself is currently trading at $45.
Typically investors buy index puts to protect their individual stock positions from overall market weakness. Because buying puts for each individual stock in a portfolio can generate big commissions, active investors have been using broader index puts as insurance.
