Option Traders See
Option Traders See
Expected Volatility
Coming Later
By KOPIN TAN
DOW JONES NEWSWIRES
NEW YORK -- Stocks flitted listlessly as traders waited for the next catalyst that might move the market -- February employment data due out Friday.
In the options market, traders seem to expect volatility and major stock-price movement to surface later. Market watchers pointed out how anticipated volatility is muted in many index options expiring in March and April, while it is more heightened in options expiring later in the year -- a sign investors are bracing for a rockier spell to follow the current calm.
In the Nasdaq 100 Index, for example, anticipated volatility of long-dated options has increased, "indicating that the options market is more concerned with the second half of the year, particularly for technology sector stocks," said Credit Suisse First Boston strategist Edward Tom.
The Chicago Board Options Exchange volatility index, or VIX, slipped 0.31 to 14.55 and continues to hover near a seven-year low. Not even the uncertainty of Friday's jobs number could rouse this 30-day forecast of market volatility.
Options premiums have increased in various medical-device stocks heading into next week's American College of Cardiology meeting. According to Goldman Sachs' option strategists Maria Grant and Jason Cuttler, anticipated volatility in Guidant Corp., Medtronic Inc. and St. Jude Medical Inc. look heightened compared with actual volatility, or with that of other health-care stocks -- "suggesting the market is expecting big news."
Among other things, the meeting will address the effectiveness of implanted defibrillators in helping patients with heart failure; a positive result could expand the market for these products, Mrs. Grant and Mr. Cuttler said.
Medtronic's short-term calls, for example, traded actively Wednesday. The stock stood at 71 cents to $47.98 at 4 p.m. Its March 47.50 calls traded 11,595 contracts, compared with 4,666 outstanding contracts, and were off 5 cents to $1.15 at the American Stock Exchange.
Write to Kopin Tan at kopin.tan@
Updated March 4, 2004
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