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Wall Street's Friday Lunch Options

By Chris Tyler, Optionetics.com | Fri March 16, 2012 10:17AM PT


More twitch-than-witch greets bulls and bears as a less-than-mad March contract comes off the board. As of the lunchtime hour, an Apple is being somewhat savored and the SP-500 (SPY), slightly favored above 1400 and up 0.17%.

Bulls’ favorite toys are still being gently held and as a result, Quadruple Witching, wrongly named as a day defined by threatening behavior, is once again proving to be anything but a menace. In those intertwined and often interchangeable markets of influence, shares of the “1.04 beta version” of Apple (AAPL) are holding a narrow lead over the SP-500, but only after slashing prices on its trader product from $600 early Thursday to a reduced $587.

In officially-sanctioned economic news, aside from demand swamping supply for Apple’s anxiously-awaited third generation iPad rollout this morning, reports have proven mixed. CPI data for February showed an in-line 0.4% for total consumer prices. Stripping out the little things such as soaring gas prices and food, analysts were pleased to see a lighter-than-expected and tepid increase of just 0.1% versus forecasts of 0.2%.

Industrial production data for February came in at 0.00% and far weaker than views of 0.5%. However, an upward revision of four-tenths of a percent to 0.4% for January has provided a supportive buffer for bulls.

And a bit further into the session, a reading of consumer sentiment out of Michigan produced a bit less “Rah!, Rah!” cheer than expected. Compared to February’s 75.3 and preliminary forecasts of 75.8 for March, analysts have put been forced to withdraw the pom-poms with today’s latest and slightly less great figure of 74.3, but one still subject to revision.  

In those other markets of sporadic influence, shares of the US Oil Fund (USO) are up 0.70%. The action follows a successful “sell the news, buy the news” hammer test of key support within a three week base triggered by word of the US and UK planning to tap into their strategic reserves to avert potential economic slack tied to higher oil prices.

Shares of the 20-Year (TLT) are off by a narrow 0.20% positioned just below 200SMA resistance for a second session after a decisive two day decline on “game off” QE3 disappointment. With lower prices providing higher yields, as well as a potential double bottom in-the-making, a less-sung counter offensive play by bulls looking to park their capital in spots other than Apple and the likes, might be appreciated.

Finally and in those sometimes accurate heat-seeking option markets, drug upstart Ariad Pharmaceutical (ARIA) is atop the unusual activity list for Russell 2000 constituents Friday. Typical volume of about 3,500 has been easily surpassed nearly 12,000 contracts traded. As its expiration and after spying the board, some of the volume looks tied to rolling out put positions into April on the 14 strike with 1,500 traded in March and 3,100 in Monday’s new front month.

Another pocket of interest, the April 16 call with volume of 2,200 versus open interest of 725 suggests some fresh opening of positions in the out-of-the-money call. Implieds are static but bid overall. Shares are off fractionally by 0.45 with buzz of a FDA panel questioning the risk benefit of its Merck (MRK) partnered treatment for sarcoma acting as a primary catalyst.

Technically speaking and with shares of ARIA  trading within a two-month long flat base pattern that’s found key support off its monthly chart highs dating back to 2004, we can’t blame bulls or bears for wanting to look to Ariad's options for something more than simple shareholder value.

 

Chris Tyler
Senior Options Writer, former Market Maker & fulltime Option Hedge Hog Advocate
Optionetics.com ~ Your Options Education Site
Visit Chris Tyler’s Forum
 
The information offered here is based upon Christopher Tyler’s observations and strictly intended for educational purposes only, the use of which is the responsibility of the individual. 



Recent articles by Chris Tyler, Optionetics.com


September 21, 2012  -  Wall Street's Friday Lunch Options
September 21, 2012  -  Hot Shots: All Aboard or Train Wreck?
September 20, 2012  -  Wall Street's Thursday Lunch Options
September 19, 2012  -  The Expected Move: Bed Bath & Beyond Earnings
September 19, 2012  -  Wall Street's Wednesday Lunch Options


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