×

Jon's January Jumps

tomorrows_playbook_3.jpg

Options “backwardation” could make for great trades during the 1st week of January. Confused? Jon Najarian explains.

I’m seeing “backwardation” in option premiums for two names, Echelon Corporation (ELON) and Hang Seng (HSI), Najarian says. Typically this phenomenon, (which is essentially higher prices for puts and calls for the front month contract) leads to sharp rise in the underlying stock.

Echelon Corporation Options Buying

Implied Volatility

94 84 81
Jan. Feb. Mar.

Hang Seng Options Buying

Implied Volatility

41 36
Jan. Mar.

This data suggests to me both stocks will move to the upside in early ’08, concludes Najarian.

* Note: On Monday December 31st the Fast Money panel was made up of:
Brian Schaeffer, Van Der Moolen Capital Markets Managing Director
Carter Worth, Oppenheimer Chief Market Technician
Jon Najarian (Pete’s brother) aka The Monster
Guy Adami aka The Negotiator

______________________________________________________
Got something to say? Send us an e-mail at fastmoney-web@cnbc.com and your comment might be posted on the Rapid Recap! Prefer to keep it between us? You can still send questions and comments to fastmoney@cnbc.com.

Trader disclosure: On Dec. 31, 2007, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Jon Najarian Owns (AGU), (AAPL), (BAC), (BSC), (C), (CSCO), (DPTR), (ELON), (GS), (LEH), (MA), (MER), (MON), (MOS), (RIMM), (SOLF), (TSO), (VLO), (WM), (UBS), (XLY), (SBUX); Jon Najarian Is Long Hang Seng Index; Armstrong Owns (UUP) ; For Carter Worth – Oppenheimer & Co. Has Received Compensation For Investment Banking Services Provided To Wachovia On May 1, 2007; Oppenheimer & Co. Is A Market Maker In (ISRG, (YHOO) and (RIMM)