Options markets sometimes have a reputation for making people feel like they're getting their pockets picked. But sometimes, trading them can be a rewarding effort.
With tech giants
Dow Jones Industrial Average
Monday, it may be smart for investors to get into it a day early, said Harvey Baraban, a technical trader who teaches courses on technical analysis at San Francisco's
Golden Gate University
, which are unit trusts based on the DJIA, could be an interesting buy Friday afternoon, said Baraban, who bought Diamonds this week.
"You're getting Monday's prices today," explained Baraban, who notes the inclusion of four new stocks Monday -- Microsoft, Intel,
will lead the Dow still higher next week. All four stocks are already breaking through their 52-week highs. "They are now in a whole new trading range," he said.
For investors determined to own the 30 component stocks of the Dow, the best way to do so may be Diamonds. The Diamonds, a basket of instruments that replicates the performance of the benchmark, are derivatives in that they were designed to approximate roughly 1/100 the value of the Dow.
Currently, Diamonds are trading at 107 5/16, up 1 3/8. That means that for a little more than $10,000, you can buy 100 shares of Diamonds for one fee, vs. the 30 fees an investor would pay to purchase each stock.
Elsewhere in trading, the most actively traded issues were -- surprise! -- technology stocks. The
unit trusts were among the most actively traded, and a short squeeze was emerging in the index options.
Chicago Board Options Exchange's
fear gauge, the
, showed worry pretty much evaporating, with the VIX at 22.38, down 0.31.
"If we can get the VIX approaching the teens, I'd want to get short the market. It's my sense that over the last two days, the shorts are coughing up their teeth like Chiclets," said Greg Simmons with
Linear Capital Management
, a hedge fund specializing in index options.
"I think there's been huge problems in the
Standard & Poor's 500
index. They were looking for a down move into the ECI; now they're really in trouble. The sentiment has changed too much in 72 hours to be healthy," Simmons said.
"I'm moving out the calendar to January to sell SPX puts at 1275s to get any premium," he added. Currently, the SPX trades at 1371.3, up 28.86. "I'll be shorting the market again with the SPX at 1377.5 or 20.5 on the VIX."
Among individual options,
saw some tasty action in its options. This past summer, the company hired some Street bankers to "explore strategic alternatives."
Michael Foods stock was up 9/16 to 26 and what appeared to be a brand new trade opened up in the December 25 calls added 9/16 ($56.25) to 2 7/8 ($287.50) on volume of 172 contracts. Previously there was no open interest.
call options were also racking up gains, even out-of-the-money calls trading above the current stock price. Rumors were circulating that Chubb was higher as a result of
casting his eye on the insurer.
With the stock up 3 3/8 to 54 9/16, Chubb's November 55 calls had notched up 1 1/8 ($112.50) to 1 13/16 ($181.25) on fairly thin volume.
Senior Writer Eric Moskowitz contributed to this story.