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
94 84 81
Jan. Feb. Mar.
Hang Seng Options Buying
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