A rebound in major stock proxies was easing the anxiety levels in the options market Monday, as trading in options on tech stocks -- particularly in companies reporting earnings this week -- was heavy.
Chicago Board Options Exchange
volatility index was down Monday, reflecting a moderate easing of angst in the market in the wake of the stock market's recent crushing losses. The volatility index, better known as the VIX, which spiked to an 18-month high
Friday, fell modestly and at midday was down 2.8% to 38.22.
The VIX Friday peaked at 41.53, before settling at 39.33. The VIX is based on options trading in the
. The S&P 100 was up 5.70, or 0.8%, to 737.66.
Larry McMillan of
in Morristown, N.J., pointed out that implied volatility on options in general is at its highest level ever, with the possible exception of the 1987 market crash. That means, the higher the volatility levels for options, the higher the premium investors pay for options.
Implied volatility, a key factor in an option's price, is the annualized measure of how much the market thinks a stock or index can potentially.
Meanwhile, the CBOE equity put/call ratio, which settled at 77 Friday, was down Monday to 71.
Jon Najarian, the head of Chicago market maker
, said there was pretty significant profit taking from investors that were short, which was contributing to some of the rally. Najarian said it was more a short-covering rally rather than a matter of investors really wanting to own stocks.
Najarian highlighted the fact that this week has a heavy calendar of earnings reports and that if they come in good, it might cause the market to stabilize.
Indeed, there are tons of notable technology companies slated to post earnings this week. On Tuesday,
are among some of the tech giants that are expected to post quarterly results.
As usual, options speculation has been brisk among those names as investors try to decipher which way an earnings report will push a stock.
For example, AOL's May 65 calls and May 55 calls were active as the stock traded down 1/16 to 54 15/16 at midday. On the
Philadelphia Stock Exchange
, nearly 20,100 contracts of the May 65 calls have traded, while 12,067 contracts of the May 55 calls have traded.
Meanwhile, a little more than 20,000
out-of-the-money January 2002 70 call option contracts traded for about 5 1/2 ($550) Monday. Shares of MCI WorldCom were up 1 11/16 to 39 11/16.
In index options, volume on the
Philadelphia Stock Exchange Oil Service Index
contract was heavy, notably in the in-the-money May 110 puts, which have seen 5,150 contracts trade. Those May 110 puts were 12 1/4 ($1,225 per contract), up 1 5/8 ($162.50) and open interest on the contracts stood at 1,220 Friday.
Call options were also active on the OSX, notably the May 105 calls, which have seen 2,500 contracts trade, compared to open interest of 164 contracts. The May 105 calls last traded at 7 ($700 per contract), down 5 1/2 ($550). The OSX itself was down 3% to 102.55.
Looking ahead, a reminder to options traders that April American-style options expire on Thursday because the options market is closed on Good Friday.
Knight/Trimark Beefs Up Options Operations
In a move to beef up its options operations, market making firm
announced this morning that its subsidiary,
Knight Financial Products
(formerly known as
) has bought the floor brokerage operations and professional execution business of Chicago-based
. Terms were not disclosed.
Knight completed its acquisition of Arbitrade in January as an early foray into the options business. Options professionals expect Knight will continue to make inroads into the listed options trading business to broaden its operations beyond the equity business.
Shares of Knight were off 1 7/16 to 32 at midday.