Tuesday's offered a little of something for both bears and bulls, as long as they haven't overstayed their welcome. As of 10:55 ET the S&P500 (SPY) is mostly flat with a fractional drop of -0.10% but in volatile intraday action that belies the current "no harm, no foul" start to the sometimes treacherous month of September.
In company news, the still powerful but quiet of late, NASDAQ 100 component and internet auctioneer behemoth eBay (EBAY) is finding some aggressive bids in Tuesday's first half. The company announced a definitive agreement to sell a 65% stake to private equity in its increasingly popular Skype (think Oprah) video interface product for $2.75B.
Intraday, shares of EBAY are up 0.40 at 22.54 and pulling back from session highs of 23.18. Technically, the daily/weekly chart finds Tuesday's stock action attempting a breakout of a slightly loose five week flat base.
On the option side, call activity in the front two months is dwarfing the puts by more than a 3-to-1 margin on strong overall contract volume in excess of 23,000. Most popular with traders are the slightly OTM September 23 and 24 calls with a combined 9,000 trading.
Priced near 35% implied volatility, premiums are considered generally fair theoretically when eyeballing the past month's 10, 20 and 90 statistical volatility and trading "middle of the road" relative to front month implieds over the same period.
Continuing to be the cure-all for bulls, subsector a handful of the increasingly familiar swine flu names (NVAX, BCRX) are receiving booster shots in share prices and option premiums. Sinovac Biotech (SVA) is Tuesday's high-flyer with shares up an additional 18% to put its three day total near a double to $11.35.
Shares of SVA were up nearly 54% Monday on news the small capper had passed an experts evaluation from the SFDA for its H1N1 vaccine and is expected to receive a license for production within a week.
On the option side, implied volatility has soared the past two sessions from the "Sell 100" category of fading the desires and proclivities of the ever-wishful hopeful crowd to the plus "Buy 200!" realm of momentum pricing.
"Sell 100, Buy 200!!" is an old floor trader's adage regarding implied volatility. And when a stock's options get to the "Buy, Buy, Buy!!" stage of theatrics, it typically coincides with a breakdown of confidence and right about the time where anything (on a chart) seems possible-sometimes even in the span of five minutes.
Most popular in Tuesday's feeding frenzy are the front month in-the-monies 7.5 and 10 calls with more than 3,500 trading and customers likely in the process of requesting additional strikes above the current share price of 11.25.
Elsewhere, embedded volatility of Tuesday's intraday charts is seeping into the daily as the S&P500 (SPY) has taken a quick turn for the worse over the span of less than an hour. In front of the lunchtime hour, the SPY is off 1.50%, eclipsing first hour lows and within 1% of Wall & Main's former flame "SP-1000."
Bulls appear to be taking a "little schnitzel off the table" for its own sake. Two out of three released economic reports from earlier, such as the ISM's stronger-than-expected data and surprise strength in pending home sales; concur. Leading the profit-taking which could eventually lead to yet another memorable September sell-off are the financials (XLF, BAC, WFC, JPM).
Ex-Toxic Avenger and bullish super stock of late, AIG (AIG), is getting zapped for a second-straight and more difficult-to-exit session as dreams of fancy take a backseat to more pressing realities. Intraday, shares of AIG are of 15.50% near 38.25.
For its part, should the SPY test the formerly coveted level of 1000 (thought a bit of a shoe-in) the corrective status of the historic uptrend would stand at 4.17%. Not bad, but normal and healthy corrections can last up to 10%. Appreciating how the fifty-plus percent rally of the past six months has been anything but-I'd wager the latest pullback isn't over just yet and Fast Money won't be saying (in hindsight), "Well, you had to buy"" in tonight's show.
Chris Tyler
Senior Staff Writer & Options Strategist
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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.
