Option Investor
Market Updates

Markets gyrate after lower open

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Stocks have been showing some wild swings this morning after opening lower. Just as stocks were starting to show some strength and many of the major indices were in positive territory, shares of International Paper (NYSE:IP) warned that earnings for the current quarter would come in near $0.05 per shares verses estimates of analysts at $0.15. Shares of IP were halted at $36.15, but the MARKET sure looks like it sold off on this earnings warning. I'd at least keep an eye on IP today from time to time, as it is important for traders to monitor the MARKET's reaction. While we all may think that the stock gets hit to the downside, we should pay more attention to the market's response.

S&P-100 Index Chart - 60-minute interval

It's tough to make big bets in any trade this morning with a chart that looks like that from above. There are as many things in the above chart that give the potential for a turnaround and there are that say lower. In condition like we are currently in, account management and trade size become key. I would suggest any trader trying to go long or short current market conditions only trade 1/2 position than they usually do. This is where your trading discipline comes in handy. If your trading discipline says your largest trade size for an option is $2,000, then I'd suggest just trading $1,000 in current conditions.

Jeff Bailey
Senior Market Technician

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