Options In Focus: Apple and Stocks Slip In Muted Session

–(www.FinancialNewsUSA.com)– 01/05/2010 – Financial News industry news provided by Financial News USA. By crowd proxy in the options, one spread that looked popular for bulls entering amidst today’s slight weakness, was the January 110 / 120 bull call spread. With time remaining, a near equal 15,000 contracts had traded on each of the two strikes, making the contracts the most active by a margin of about 50%.

Priced at $3.30 to $3.35, the spread looks worth considering. Implied volatility in January is under a bit of pressure today near 29% and back near the lows of a fairly tight implied trading range for the past month.

Theoretically, implieds are slightly elevated relative to statistical or realized volatility of AAPL stock. Currently, the short to longer-term values form a range from about 23.5 % to 27%. As Apple options have maintained a tendency to trade above its SV readings, prices could be said to be reasonable for a straight purchase.

The problem with getting edge from a straight call (or put) purchase because it’s “cheap”, is the delta. [Read the full article]

Mixed economic data hit stocks Tuesday. The Case-Shiller home price index for October tumbled more than expected. Consumer confidence improved in December, but still came in a tad below estimates.

The Nasdaq, the NYSE composite and the S&P 500 slipped 0.1% each. The Dow gave up a fraction.

China Automotive Systems (CAAS) reversed early gains and dropped 5% in heavy trading. It snapped a three-session win streak. The stock cleared a 17.72 buy point from a three-weeks-tight pattern Nov. 30. It’s now working on a new base.

SanDisk (SNDK) erased morning gains and lost 4% in heavy volume. The stock reversed from a 19-month high Monday.

American Greetings (AM) fell 3% in nearly twice its average volume. The stock cleared a cup base last week, but triggered the 8% sell rule Tuesday. American Greetings trimmed some losses after finding support at its 50-day moving average.

Medifast (MED) shed 4% in heavy trade. [Read the full article]

On Wall Street, getting in early on the next big thing can also be profitable. Brown Capital Management Small Company Fund makes its bones seeking early-stage gems.

The $662 million fund calls itself small-company-focused rather than small-cap-focused. The fund aims for companies that can grow a lot. They see revenue as a better indicator of potential than market cap.

This approach led to a 46.22% gain this year, going into Tuesday. The fund’s small growth rivals tracked by Morningstar averaged 36.56%. The S&P 500 was up 27.87%.

Over the past three years, the fund’s average annual gain was 7.21% vs. -5.28% for its peers and -5.42% for the S&P 500.

The fund bought shares in Cheesecake Factory (CAKE) in September 1993 at a split-adjusted price of 3.84.

“They had maybe 10 locations or less,” said co- manager Kempton Ingersol. “We weren’t sure what the company’s overall capacity would be. [Read the full article]

Investors shrugged off upbeat consumer confidence data. Longer-dated Treasuries led the way in price gains, while notes along the middle of the yield curve held closely to the previous day’s closing prices. Yields on two-year notes stayed stubbornly above 1%.

“The market is holding in there – yields are up a lot from their low levels, so that may be enticing some people to buy,” said Mary Ann Hurley, vice president for fixed-income trading at D.A. Davidson. “But given the amount of supply we have to bid on, the market is putting in a good performance.”

The five-year auction, which analysts described as “decent,” was the second of three scheduled for this week. The Treasury Department plans to issue a total of $118 billion in new debt.

Tuesday’s auction was met with strong demand by direct bidders, a detail analysts said could serve to calm market participants’ fears over the size of the new supply. [Read the full article] About Financial News USA

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