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The market continued last week’s drop today with lower oil prices pulling down stocks in the energy sector and fears that Alcoa (AA) will report worse than expected earnings after the close, which could signal worse earnings for other big companies. Contest favorite Citigroup (C) was down over 13% at the time of this writing on speculation that it might need more money to remain in business. To confirm the overall distress, the CBOE’s VIX volatility index moved up 2.5 points to 45.32%.
One green spot on a screen otherwise dominated by red was American Medical Systems (AMMD). It isn’t one of the more popular stocks in the contest, but some of you had positions in it. It was up 20% on Friday, and is up nearly 1% today at the time of this writing. The company reported better-than-expected fourth quarter estimated sales last Thursday night, as well as FDA approval of one of its products. The stock is down from a 52-week high of $18.42 last August, and had been hovering around $9 for the past few weeks. AMMD options are not traded very actively, and looking at volume comparison measures isn’t that helpful. But implied volatility of the options started increasing back in last October as the stock joined in the crash. Volatility then stayed high even as the stock wasn’t moving much, which would indicate the possibility of a big move up or down. Well, the traders who were long and keeping their fingers crossed for a spike higher got one. The big question is whether AMMD will continue to climb, or sink back down and fill the little gap it made between $9.30 and $9.50. Volatility is still high, even after dropping a bit when the news came out, which means that the big price swings probably aren’t over. All AMMD traders should keep their helmets on. The ride might not be over yet.
Tom Preston
thinkorswim, Inc.
Member FINRA/SIPC/NFA
thinkorswim, Inc. and its registered employee, Tom Preston, do not solicit or recommend any form of trading in the individual stocks (or their derivatives) mentioned above. Please do careful, independent research before investing any money as well as weigh the possible consequences on your particular financial situation before doing so. The risk of loss may be substantial.
