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<DIV><FONT size=2>Hello everybody</FONT></DIV>
<DIV> </DIV>
<DIV><FONT size=2>This is an ongoing project I have undertaken with BobR to try
and understand the "tape" as printed by options volume and OI.</FONT></DIV>
<DIV><FONT size=2></FONT> </DIV>
<DIV><FONT size=2>Maybe the good DocOEX can throw some light into this action -
although through his many seminars he has often made clear that these statistics
have leseer and lesser significance given the complexity of the participants'
needs behind trade execution these days.</FONT></DIV>
<DIV> </DIV>
<DIV><FONT size=2>I still find the action fascinating - and often find good
trades based on clusters of OI and volume activity v/s low OI.</FONT></DIV>
<DIV> </DIV>
<DIV><FONT size=2>As a case study, I have the foll that I am trying to
understand:</FONT></DIV>
<DIV> </DIV>
<DIV><FONT size=2>At 2 PM eastern today (Nov 16) the OEX options had a certain
profile of Volume and Open Interest for nearby strikes.</FONT></DIV>
<DIV> </DIV>
<DIV><FONT size=2>At 5 PM (post settlement), the options had a different Volume
and Open Interest profile.</FONT></DIV><FONT size=2>
<DIV> </DIV>
<DIV>A gif is encl, giving you the net volume activity at each strike, with 2
zones highlighted for your attn.</DIV>
<DIV> </DIV>
<DIV><FONT size=2>While I refuse to get into the predictions business, the mind
is often subject to temptation - and hereby I submit the foll:<BR></FONT></DIV>
<DIV><FONT size=2>Background:<BR>a/ There has been, since Nov became Front
Month, a cluster of OI at the 720 call strike (indicating that someone(s)
was short a bunch of them.</FONT></DIV>
<DIV>b/ Once the bottom was put in, 720 became resistance, and then support
going into the rally we got in the past 3 weeks.</DIV>
<DIV>c/ This 720 call glaring OI rolled up to the 740 call strike, where we
found ourselves yesterday.</DIV>
<DIV> </DIV>
<DIV>The whole world that trades options and bothers to look at data saw this
phenomenon.</DIV>
<DIV> </DIV>
<DIV>Today, as you know, 740 was taken out after the Fed announcement. </DIV>
<DIV> </DIV>
<DIV>My opinion (It is foolish in this world to have an opinion, but here goes
anyway):<BR><BR>a/ Short covering the large OI strikes unilaterally on the call
side is likely to propel the OEX much higher than we currently are by
Friday.</DIV>
<DIV>b/ At the same time, we saw tremendous put volume kick in versus very low
OI just below OEX active trade price. This could either be </DIV>
<UL>
<LI>smart money collecting whatever premium they could before Friday by
selling put premium (bullish case)</LI>
<LI>smart money putting on new trades on the cheap, as VIX imploded and buying
downside becomes prudent as bears begin to throw in the towel.</LI></UL>
<DIV>Question: How does one interpret the action in the OEX pits between 2pm and
4pm?<BR><BR>There was no significant rollover into Dec strikes, the volumes
don't match.</DIV>
<DIV> </DIV>
<DIV>This question is unrelated to the other (longer term) tape reading, that of
money flows into and out of stocks. </DIV>
<DIV> </DIV>
<DIV>Those still indicate comfort - and in fact a sense of urgency - with the
buying of banks, select internets, communications equipment companies
and select midcaps - you know - the Citibanks, the GEs, the AOLs, and the
Lucents, Ciscos and Global Crossings of the world - and a nagging preference
away from the IBMs and MSFTs. </DIV>
<DIV> </DIV>
<DIV>Which tells me that the preference for the market is up, give or take a
couple of shallow pullbacks as typically happens after any sort of
explosion.</DIV>
<DIV> </DIV>
<DIV>Thanks</DIV>
<DIV>Gitanshu</DIV>
<DIV> </DIV>
<DIV> </DIV></FONT></BODY></HTML>
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