Most Active Stock Options July 17, 2009

The top 10 most active stock option contracts traded today were all for either Citigroup (C) or Bank of America (BAC). Read my blog post 10 Stocks to Watch on July Options Expiration for some possible reasons why. It is unusual that all ten of the most active option contracts were between two stocks. Usually you'll see the S&P 500 SPDR (SPY), Dow Diamonds (DIA), or the PowerShares QQQ (QQQQ) trade in the most actives, but not today on this options expiration Friday. The list of most actives is in order below.

1. Citigroup July 3 Call Option
   
2. Citigroup July 3 Put Option
   
3. Bank of America July 13 Call Option
   
4. Citigroup August 3 Call Option
   
5. Citigroup August 3 Put Option
   
6. Bank of America July 13 Put Options
   
7. Citigroup August 5 Call Options
   
8. Citigroup August 4 Call Options
   
9. Citigroup July 5 Put Options
   
10. Citigroup August 5 Put Options
    

I Assume the Stock Market is About to Get Real Volatile

Historically on options expiration days especially, as we enter the witching hour (an hour before the stock market closing bell) things get very volatile.

4 Things to watch for on options expiration:

• Violent Swings either up or down
• Market velocity; how many times it crosses into positive territory from negative and vice versa
• The Volatility Index (VIX); anything below 30 is a sign of market stabilization, watch for the VIX to turn positive (currently down 1.42 points to 24)
• Option premiums explosion; sometimes the time value premiums on options get pushed up, as many traders are trying to close positions and will pay higher premium just so the stock is not assigned

I assume the stock market is about to get real volatile...

STEC Options Trade Update: Over 1000% Gain in 42 Days

As stated on July 14 in my blog post Research + IBD = HUGE Profit I was looking to get out of STEC Inc (STEC) on the 15th, but did not as stated in my blog post STEC Still Bullish. I May Let the Options Expire and Take the Stock. However, on July 16, 2009 I traded out of 80% of my call contracts for a gain of over 1000%. STEC has been on fire and I wanted to lock in this huge profit. I will allow my remaining option contracts to exercise, and I'll most likely begin writing out my shares Monday for the August 30-35 strike range. I sold the call contracts for $14.80 per share or $1480 per contract yesterday, a gain of 1020%.

As stated before, thanks to some tedious research, knowing which options to buy and when, and IBD I was able to pull this profit in just over 40 days.

CIT Group (CIT) Talking with JP Morgan and Goldman Sachs about Financing Options

The Government stated they would not back CIT Group (CIT) but technically they are. CIT is in talks with JP Morgan (JPM), and Goldman Sachs (GS) seeking short term financing for $2 to $3 Billion to avoid bankruptcy. If JP Morgan and Goldman Sachs back CIT Group, and the U.S. Government is backing JP Morgan and Goldman Sachs... Then isn't the U.S. Government technically backing CIT Group?

Mid Day Stock Options Watch July 17, 2009

The top 10 stock option contracts which have traded as of mid day July 17, 2009:

1. Citigroup (C) July 3 Call Option
   
2. Bank of America (BAC) July 13 Call Option
   
3. Citigroup (C) August 4 Call Option
4. Citigroup (C) August 3 Call Option
5. Citigroup (C) August 3 Put Option
6. Bank of America (BAC) July 13 Put Option
7. Bank of America (BAC) August 13 Call Option
8. General Electric (GE) July 12 Call Option
9. Financial SPDR (XLF) July 12 Call Option
10. Citigroup (C) August 5 Call Option

Surprisingly the first two on this list were two options I performed an analysis on last night here, and were declared the "best bang for your buck".

Looking ahead to the August options listed above, it looks like the options market is predicting a further rally in the financials. Be careful going short.

VIX Sinks Below 25 on a Rather Volatile Trading Session

The Volatility Index or VIX has dropped below 25 on this volatile options expiration Friday. The VIX has not been this low since September 11, 2008. I think the VIX at these levels is a very bullish sign for the stock market. However if we finish down (significantly) on both the Stock Market and the Volatility Index, I believe a short term correction will come sooner rather than later.
See the VIX charted below (click to enlarge).

Stock Market Volatile for Options Expiration

I have traded the call contracts for the FAZ July 43 at least a dozen times already resulting in gains of 50% - 77%. I'm also looking to get out of Level 3 Communications (LVLT), as I picked this up less than a week ago for $1.37 a share, and the options on this stock are nearly illiquid. However I'm having a very difficult time getting my ask of $1.58 to get hit.