Options Buzz
Here's a quick reminder to investors who were bemoaning low options prices as a bad thing: Be careful what you wish for -- you may just get it.
Twentysomething
"It's unlikely to get back into the 20s for a long time. You have to find someone to sell options for it to go down," Rosen says. Strangely enough, while selling call options against stock positions had become fashionable when the VIX was so low and the returns were slight, rising options prices mean that investors are again buying options. And that also is likely to go on for awhile. "I think what happened is that when the market broke, people realized that while it's nice to have a covered call position, it doesn't protect you that much," Rosen says. It certainly didn't protect them if they were holding shares of Safeway (SWY), which has fallen more than 20% in the last four trading sessions, or Abbott Labs (ABT), which is down 17% just this week. The 5% returns you may have gotten selling call options doesn't feel much like a cushion now that you've fallen out a third-floor window, does it?Anxious Night Watch
Rosen says put-buying now reflects uncertainty about overnight events that could roil the markets and scandals that quickly can do huge damage to single stocks. Put-buying was heavier than usual in Lehman Brothers (LEH) on Monday and Tuesday, but there was only a smattering of activity on Wednesday. That's likely to be indicative of what the market brings up through the summer -- a season that usually shows little increase in options prices -- as investors buy real hedges on stocks they like or play weakness in the ones they don't. Strange as it may sound, prices are higher and people are buying instead of selling. In the past few months, wise traders may have been buying puts. They're getting paid well now, but Rosen reckons it now may be harder to express fundamental opinions on stocks via options. The reason: Over the past four or five months, investors didn't have to worry about options prices and volatility measures getting much lower. Now that they're higher, price contraction is the new worry. But worry is usually good for the investors. It's the wishing that kills them every time.TheStreet Premium Services
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| Dow Jones | S&P 500 | NASDAQ | 10-Year Note |
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| 12,419.86 | 1,313.32 | 2,837.36 | 16.25 |
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