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VIX - Market Sentiment:

Monday S&P futures were trading mostly flat heading into the open trading less than 6 handles top to bottom. The market continues to power higher even with a dismal report and outlook from DOW heavyweight Caterpillar (NYSE:CAT). Two of the big movers today on high volumes were names, which I am long and short Keryx Pharma (NASDAQ:KERX) and 3D Systems (NYSE:DDD). For those who follow my trades on twitter I have been shorting DDD following the big put activity for the last 2 weeks. Today those puts are managing some huge gains as volatility is exploding as the stock sells off on massive volume. KERX however I am not as happy with as I unfortunately sold the 4.00 strike calls for .45 last week and left more than 2.00 of upside on the table. Regardless a gain is a gain and I'll keep looking to find the next opportunity. The NYMO reversed on Friday's close above 1500 and closed with a reading of +35.15 a 2.31 point increase from Thursday's close.

The spot CBOE Volatility Index (VIX) and futures ticked higher, heading north of 13.00 and jumping more than 5% on the day. Volatility ETF (NYSEARCA:VXX), 2x ETF (NASDAQ:TVIX), and alternative 2x ETF (NYSEARCA:UVXY) recovered ever so slightly heading higher with the VIX futures. Friday I reported (here) a small to mid size risk reversal in the VIX February futures. Today sellers came in yet again trying to sell down VIX futures further out in time buying the 15 puts strike March puts. These were accumulated more than 27K times today. The interesting piece here is if this will add to March open interest of the strikes currently sitting at 103K or if it will decrease signaling a short cover. Regardless options activity and volume today was rather blah just how I feel just trying to get over the flu.

(click to enlarge)

Statistics and Screenshot Provided By LiveVol

VIX futures are below.

Yesterday

· February VIX futures 14.05

· March VIX futures 15.03

· April VIX futures 16.00

Today

· February VIX futures 14.58

· March VIX futures 15.35

· April VIX futures 16.23

Options Paper:

Overall paper was nothing short of pathetic heading into the final hour of trading just passing 12.8M contracts. S&P ETF (NYSEARCA:SPY), Apple (NASDAQ:AAPL), Emerging Markets ETF (NYSEARCA:EEM), Facebook (NASDAQ:FB), and ^SPX were the top five in terms of options volume today. No names are trading above average option volume with the exception of EEM, and FB. On the slow day it is important to note the names, which did trade heavy volume. ConAgra (NYSE:CAG) traded more than 47K contracts today but this was nothing more than a dividend steal tactic. KERX, Kinder Morgan (NYSE:KMP), Petsmart (NASDAQ:PETM) and H&R Block all saw more than 21x average daily volume today. HRB specifically had a large directional trade put on today which was clear as day. Today just before noon someone came in selling the April 20 strike puts for .15 10.6K times and at the same time bought the April 25 strike calls for .15 10.6K times. Although the net of this trade cost the trader nothing (other than the 20M hold in buying power) it does provide great leverage to the upside if HRB rallies to through April expiration. The trader was not done with tis stock though as the exact same trade then went off again at 1:08 doubling the hold in buying power and the position size. This trade is known as a "Risk Reversal" and is a leveraged bullish trade to the upside and follows recent bullish call activity in this name. Although I did not participate in this specific trade I will look to position a trade around it in upcoming weeks on any pullback or volatility collapse. Options in this name were more than 23x average daily volume with calls net bought 156K and puts net sold 330K times.

(click to enlarge)

Statistics and Screenshot Provided By LiveVol

Cisco Systems (NASDAQ:CSCO) is the leading networking communications company on the planet. The stock has been on a tear since hitting 15.00 back in July of 2012 now trading above 21.00. Pulling back ever so slightly today some large block orders came in buying the March 20 and 19 strike puts across the board. This is interesting to note because although the puts were bought to the tune of 400K the March 20's did not exceed open interest. This is something to keep on the radar because it could be a bull closing a short put for gains or someone adding to protection prior to CSCO reporting earnings on February 13th. Current open interest stands at 15.6K for the March 20 strike put and 5.5K for the 19 strike put. Overall activity in CSCO was still below average today but you should keep this on your radar moving forward for a potential trade.

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Statistics and Screenshot Provided By LiveVol

Popular ETFs and equity names with bullish/bearish paper:

Bullish Option Flows - ISE & % OTM calls bought on offer

Staples (NASDAQ:SPLS) 84% of the 21K OTM calls bought on offer

PPG Industries (NYSE:PPG) 80% of the 32K OTM calls bought on offer

Flextronics (NASDAQ:FLEX) 75%

Time Warner (NYSE:TWX) 69% - July 55 call buyers

Bearish Option Flows - ISE & % OTM puts bought on offer

SLM Corp (NASDAQ:SLM) 98% of 2.7K OTM puts bought on offer

Weatherford (NYSE:WFT) 88% of the 5.5K OTM puts bought Feb 12 puts could be closing bullish position

Under Armour (NYSE:UA) 85%

Advanced Micro (NYSE:AMD) 80%

Health Care ETF (NYSEARCA:XLV) 72% - 3K OTM puts bought

Disclosure: I am long AGNC, BA, CBB, CONE, INTC, KERX, KOS, MDR, MTGE, NRG, PG, PSX, QCOM, TUMI, VHC, VOD, and I am short CRM, DDD, EDU, SPY, VECO.

Trades today: None

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Disclaimer: The opinions in this document are for informational and educational purposes only and should not be construed as a recommendation to buy or sell the stocks mentioned or to solicit transactions or clients. Past performance of the companies discussed may not continue and the companies may not achieve the earnings growth as predicted. The information in this document is believed to be accurate, but under no circumstances should a person act upon the information contained within. I do not recommend that anyone act upon any investment information without first consulting an investment professional as to the suitability of such investments for his or her specific situation.

Source: VIX - Options Volatility And Market Sonar: Monday Recap