How Safe is Brinks (CFL)?
by Houghton and Atkeson 12/22/08
The CBOE Volatility Index (VIX) is down 4.5% today to 42.92. The VIX was down 17% last week. Although it is down more than 50% from its October high of 89, it's still high relative to historical averages.
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Market participants continue to take advantage of this high volatility by selling options premiums.
Today, in Brink's Home Security Holdings (CFL), market participants appear to be selling 1,000 March 12.50 Puts (CFLOV) for 35 cents. This activty is more than the total open interest (631 calls and 322 puts).
Brink's Home Security was spun-off from The Brink's Company (BCO) at the end of October. Given this put activity, do you feel safe with CFL?
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Looking into June, the market should begin refocusing on upcoming earnings reports for evidence the economy is gaining momentum.
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In the short-term, the government's bond auction is likely to be a key driver of stocks.
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The Treasury's auction of two-year notes brought an upside surprise which should alleviate fears of a lack of demand for U.S. paper.
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The credit market, a reliable indicator of equity direction, suggests we will break out of the SPX's trading range to the upside.
The market seems to be saying that a 30% move up from the lows is ahead of the real economy and the market needs to allow the economy to catch up.
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