Sentiment
Stocks shook off another poor jobs report and a morning sell-off attempt to move broadly higher Wednesday. Trading was tentative early after the latest report from Automatic Data Processing released before the opening bell showed the US economy losing 697,000 private sector jobs during the month of February. Economists had predicted a smaller 615,000 decline.
An early plunge in shares of General Electric (GE) also added to investor anxiety. Shares fell to 17-year lows below $6 on concerns about the company's capital position. Those worries are being fueled by a spike in CDS spreads, which comes despite recent efforts to preserve capital. GE announced that it was cutting its dividend last week. The company issued a public statement today denying that it plans to raise additional capital. That, in turn, seemed to give shares a midday lift and GE is down 25 cents to $6.76 heading into the final 45 minutes of trading. More than 1 million puts and calls have traded in General Electric as investors react to the day's news.
Outside of GE, the tone of trading is decidedly more upbeat. 27 of the Dow thirty are posting gains and the industrial average is up 240 points. The equity market seemed to find some support from overseas markets. China's Shanghai Index rallied 6 percent on better-than-expected manufacturing data. No surprises in the ISM Services Index or the Fed's Beige Book seemed to reassure investors as well. Finally, crude oil gave the energy sector a boost after rallying $3.50 to $45.15 on bullish inventory data. Risk perceptions are easing. The CBOE Volatility Index (.VIX) is down 5.81 to 45.12 and near session lows. Approximately 5.9 million puts and 6.3 million calls traded so far.
Bullish Flow
Medtronic (MDT) is unchanged at $26.88 midday and 7000 April 27.5 calls traded, compared to 32 contracts of open interest. A number of trades totaling 4,200 contracts traded ask-side for $1.4 around 11:40 ET. It appears that short-term call buyers are taking positions in anticipation of strength in MDT.
Another medical device-maker is also seeing bullish trading Wednesday. St Jude Medical (STJ) is up 94 cents to $33 and 7,800 calls have traded, compared to 890 puts. The top trade of the day: 4000 April 30 calls mid-market for $3.90 on the ISE. ISEE Sentiment data suggests the trade was an opening customer buy order, perhaps adding to an existing position.
Owens Illinois (OI) Mar and April 12.5 calls are active. 2,700 contracts traded so far. With more than 90 percent trading ask-side and very little existing open interest, it looks like call buyers are opening new positions as the stock moves up a nickel to $11.52. The bullish trading comes the day after shares of the Perrysburg, OH packaging company fell to 5-year lows of $11.30.
Bearish Flow
Sherwin Williams (SHW) is seeing relative weakness and active put buying Wednesday. Shares are down 31 cents to $45.04 after probing multi-year lows just below $44. In options action, 5,270 puts and 450 calls traded, a ratio of more than 11-to-1. March, April and June puts are seeing most of the flow. ISEE sentiment data suggest that 64 percent of the volume is opening customer put buys.
Apollo (APOL) is down $4 to $68.11 and recently made a run to session lows amind increasing interesting puts. The stock is under pressure following a negative piece by Citron Research that mentioned the risk of higher detfault rates on loans, price competitions, and forthcoming restrictions on student loans. Looks like some investors are bracing for more pain to come–possibly buying the April 55 puts and selling the 45s. 27K APOL puts traded total, or more than 5X the number of calls.
Implied Volatility Movers
Blackrock (BX) is active and volatility remains elevated, as the stock runs 52 cents higher to $6.21. April 7.5 calls are the most active, with 94 percent of today's 5,450 contracts traded ask-side. Buyers are also active in the Mar 7.5 puts. Implied volatility is up to 140, from about 134 Tuesday, and at its highest levels since early December.
Implied volatility is also higher in Apollo (APOL), Schwab (SCHW), and Lennar (LEN). Implied volatility is easing in Toll Brothers (TOL), Costco (COST), and Palm (PALM).
