Market Insights from Schaeffer's Market Blog for July 12, 2006

Strategic Insights -

In the latest edition of Schaeffer's Market Blog, analysts and traders shared their insights on the day's most notable market activity from an options perspective. The blog featured observations on various stocks, including Microsoft, General Motors, Dell, VCA Antech, and IBM.

Key Takeaways:

  • Microsoft (NASDAQ:MSFT) saw a flurry of activity in the options pits, with a block of 3,440 contracts crossing the tape on the International Securities Exchange (ISE) at 30 cents, followed by another 4,403 trades on the Chicago Board Options Exchange at the same price.
  • The trade was likely a straddle, a transaction where an investor buys a put and a call with the same strike price and expiration date, in the hope that the stock will make a significant move one way or the other.
  • General Motors (NYSE:GM) options were popular today, with heavy trading on the January 2007 22.50 put (VGNMX) and 20,028 puts trading within the first half hour of the day.
  • Dell (NASDAQ:DELL) hit a new low on negative brokerage comments from UBS, with the analyst lowering the fiscal second-quarter outlook and 12-month stock price target.
  • VCA Antech (NASDAQ:WOOF) was a bright spot in a weak market, trading up more than one percent and trading at its high of the day.
  • IBM (NYSE:IBM) shed 1.3 percent to hit an annual low at $75.48, with J.P. Morgan analyst Bill Shope trimming revenue forecasts and citing unrealistic growth expectations through 2007.

Statistics:

  • 12,152 contracts of the Microsoft July 22.50 put (MSQSX) traded so far this morning.
  • 20,028 puts for General Motors (NYSE:GM) traded within the first half hour of the day.
  • 3,440 contracts of the Microsoft July 22.50 put (MSQSX) traded on the International Securities Exchange (ISE) at 30 cents.
  • 4,403 trades of the Microsoft July 22.50 put (MSQSX) were made on the Chicago Board Options Exchange at the same price.
  • 1,671 contracts of the July 22.50 call (MSQGX) traded on the ISE at the same time.
  • 10,000 contracts of the General Motors January 2007 22.50 put (VGNMX) changed hands on the American Stock Exchange at $1.85.
  • 8 of the 15 analysts who express a preference award IBM a "strong buy."

Sources:

  • Schaeffer's Market Blog, July 12, 2006
  • UBS, July 12, 2006
  • Zacks, July 12, 2006
  • J.P. Morgan, July 12, 2006
  • Schaeffer's Investment Research, www.SchaeffersResearch.com