Overall Market Volatility: The major market indices were able to gain some ground this past week following a disastrous prior week. The Dow ($INDU) added 162.22 points, or 1.34 percent, to 12,276.32. The S&P 500 ($SPX) gained 15.68 points, or 1.13 percent, to 1,402.85. The Nasdaq ($COMPQ) tacked on 19.55 points, or 0.83 percent, to 2,387.55.
The fear indices fell off their highs reached in the prior week. However, they remain well above the lows they hit just a few weeks ago. The CBOE Market Volatility Index ($VIX) fell 24.29 percent on the week to close at 14.09. The Nasdaq Volatility Index ($VXN) gave up 19.95 percent to 18.94.
Stocks fell a few weeks ago on concerns the global economy was slowing and that interest in U.S. securities would wane as a result. Cooler heads prevailed this week with the Dow finding support at 12,000 and economic data showing that a soft landing is still likely. We could see some volatility next week when data on inflation is released. The fact is that the economy is slowing, but inflation pressures are still high and this leaves the Fed in a tough position.
HIGH VOLATILITY RANKING 3-9-07
Noble Corp Cayman Islands
Accredited Home Lenders
Energy Partners LTD
Dick's Sporting Goods
High Volatility: DKS shares have been in a channel for nearly four months between the prices of $48 and $56. On Friday, the stock closed at $53.14, adding 1.08 percent on the session. We can take advantage of a stock in a trading range by using a butterfly or condor. In fact, we can set up a March condor encasing the stock price and make $100 in each condor. Of course, there are risks and if the stock were to move sharply out of its current range, there is a possible loss of $400. However, with just 7 days left for March contracts, we only need the stock to stay between 49 and 56 by Friday to make a profit. We also could move out to an April contract to lower the risk to reward ratio.
LOW VOLATILITY RANKING 3-9-07
Federated Department Stores
XM Satellite Radio
Coldwater Creek Inc
US Airways Group
Low Volatility: NSM shares saw nice gains Friday, up more than four percent after the chip maker announced earnings. Though the company's results were short of some estimates, the fact the company has worked through inventory problems is a positive going forward. The stock is above both its 50-day and 200-day moving averages and the weekly charts points to a possible move to $32 in the next year. Yes, this is a long time, but with IV low on the stock's options, buying a LEAPS might be a good strategy to garner some longer term gains in the stock.
Senior Staff Writer & Options Strategist
Optionetics.com ~ Your Options Education Site