Chris Tyler, Optionetics.com
December 29, 2010
The midweek turn is more “ho-hum” than “bah humbug” price behavior in an ultra quiet session dictated by in-place, jolly seasonal biases. As of 10:55 ET the SP-500 (SPY) is up a rather mild 0.18% in continued difficult-to-handle and “VIX’ing” price behavior.
With nary a stateside economic report or overseas headline of notice, not a creature or umm bull or bear are stirring in Wednesday’s barely open for business session at the NYSE and / or dark pool gathering halls.
On the corporate side, consumer bulk shopping outfit BJ’s Wholesale Club (BJ) is up nearly 7% on another round of buzz private equity is still interested in the company after a few weeks of quiet.
Wednesday’s second go at exciting bulls in BJ follows a large price gap on November 10 tied to the possibility of a leveraged buyout after the company hired an advisor to pursue its “strategic alternatives.”
In unwitting sympathy, NASDAQ 100 component Sears Holding (SHLD) is surging nearly 5% intraday with some 43% of the stock’s float shorted and an attached days-to-cover ratio of 14 assisting, much to those bears chagrin.
Technically, shares of SHLD had already broken above its 50SMA for the first time since early November on news Tuesday of a new online movie downloading service.
In those often intertwined, rate and dollar sensitive markets of notice, a bounce out of Asia is acting as some background support for stateside bulls. The Shanghai Index is up 0.68% following back-to-back losses of -4.34% tied to China’s early rate hike announcement.
Asian markets are becoming increasingly important to watch as the price action could prove to be a “bear in the coalmine” of sorts for the US market.
Compared to the SP-500 which has scored gains of nearly 7% during December and registered a very un-modest showing of just three sessions with equally minor losses, the Shanghai has shed -3.0% over the same period.
Furthermore, technically the Shanghai has corrected -13% since its November highs and broken below its 200SMA this week after a month of holding prices laterally at that key longer-term support line.
Elsewhere, the iShares Silver ETF (SLV) is doing a bit more of its “Hi-Ho!” and maybe “ho-ho-hope” thing. Shares of SLV are up a leading 1.0% and following through on Tuesday’s bullish two-week long inside candle breaker.
In those sometimes accurate heat-seeking option markets of notice, regional banker Keycorp (KEY) is mostly flat on the session but has attracted some heavier-than-normal option interest worthy of putting it in the No. 2 spot for unusual activity in the SP-500.
Most active today and accounting for roughly 80% of its total 5,100 contracts, nearly 4,400 February 10 calls have traded. A block of about 1,800, 800 and 600 account for the bulk of that activity and can be assumed to be all opening transactions with existing open interest of just 1,278.
With implieds very fairly valued to cheap theoretically and the reality of this particular out-of-the money call representing all of $0.18 to $0.19 on a dollar or umm, penny basis, I can’t blame the guy or gal willing to act as a speculative buyer.
By expiration the contract will need shares of KEY to have gone up a hefty-sounding 16.50% - 17% in order to double in price to a still miniscule $0.36 to $0.38 per contract. But in taking an optimistic look at this past week’s 8-month long symmetrical triangle breakout and prices not far removed from those same levels; I’m “ho-ho-hopeful” KEY can unlock some strong gains entering 2011 with risk more than well-defined for long call holders.
Chris Tyler
Senior Staff Writer & Options Strategist
Optionetics.com ~ Your Options Education Site
