Daily Option Update: December 18, 2006

Note: The Daily Option Update is provided by Options Specialist Paul Foster of theflyonthewall.com.

U.S. stocks closed mixed Monday, as General Electric Company (NYSE:GE) and Citigroup Inc. (NYSE:C) rallied to new multi-year highs. The Dow closed down -0.10%, NASDAQ 100 closed down -0.90%, and S&P 500 closed down -0.35%. The 10-year bond rate stood at 4.5870%. The CBOE VIX closed up 0.68 to 10.73.


Research in Motion Option Implied Volatility Increased To 59 Into Dec. 21 Earnings

Research In Motion (NYSE:RIMM) is expected to report EPS of 93 cents on December 21, 2006. Oppenheimer said "We rate the shares of RIMM Neutral, due to concerns over valuation and the potential long-term impact of competition in the smart phone segment. However, we expect that the company's November & February quarter earnings will be robust, based upon our recent channel checks." RIMM's overall option implied volatility of 58 is above its 26-week average of 41, according to Track Data, suggesting larger risks.


Harrah's Implied Volatility Collapses As Official Deal Announcement Nears

Dow Jones reported a source who indicated that Harrah's Entertainment Inc. (NYSE:HET) would accept a $90 share bid from private equity. HET overall option implied volatility 12 is below last week's level of 18 according to Track Data, suggesting decreasing price risks.


Option volume leaders Monday were: Novellus Systems (NASDAQ:NVLS), Altria Group Inc. (NYSE:MO), Oracle Corp. (NASDAQ:ORCL), and Harrah's.