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Sentiment

As of 3:15PM EDT: Stocks are showing some resilience Wednesday. After a 379-point rally Tuesday, the Dow Jones Industrial Average opened steady, but then faltered in morning trading. Weighed down by losses in AMEX (NYSE:AXP), General Electric (NYSE:GE), McDonald's (NYSE:MCD), and Pfizer (NYSE:PFE), the Dow made a run to 6,868 by midday, down 58 points on the session.

Yet, with an empty economic calendar and no earnings of broad market significance, a lack of negative news items seemed to keep the bears at bay for a second day. The Dow Jones Industrial Average is up 30 points heading into the final forty-five minutes of trading, with JP Morgan (NYSE:JPM), Citi (NYSE:C), and HP (NYSE:HPQ) leading the industrial average in late-day action.

In the options market, sentiment remains upbeat. After falling 5.31 to 44.37, the CBOE Volatility Index (.VIX) is down 1 point to 43.37. Approximately 8 million calls and 5.4 million puts have traded so far.

Bullish Flow

Axsys Technologies (AXYS) is up $8.81 to $36.81 and hit a high of $39.25 following a Reuters report that the company has put itself up for sale, asking roughly $60 per share. In the options market, volume is running at 22X the normal levels, with 6300 calls and 1,400 puts traded. Most of the activity is in the Mar and April 35 calls. While some of the higher strikes are seeing some volume, the overall trading in the options market seems to reflect skepticism about the company's ability to get a price significantly greater than current levels.

Alliance Bernstein (NYSE:AB), a NY-based asset manager, is up 76 cents to $12.25 amid takeover chatter and after the company announced today that its assets under management declined by 8.2 percent to $394 bln in February. In the options market, volume is running at 11X the typical pace with investors showing increasing interest in March 15 and 12.5 calls. Looks like buyers dominating the flow and opening new positions.

Freeport McMoran (NYSE:FCX) is up 73 cents to $34.90 and 83,000 calls traded, compared to 27,000 puts. The top trades of the day are in the May 35 and 40 calls after a strategist apparently bought the spread 24000X for $2.15 on the NYSE. One of the legs might be closing and it could possibly be a roll from the lower to the higher strike.

Bearish Flow

Starwood Hotels (NYSE:HOT) puts are active. Shares are up 41 cents to $11.74 and traders are showing interest in March 12.5 and 10 puts, with about 8,200 traded and 54 percent trading ask-side of the bid-ask spread. The co. is presenting today at the Raymond James Institutional Investor conference in 10 min.

Vulcan Materials (NYSE:VMC) is up 19 cents to $36.54 and 13K puts traded, or about 6 times (612 percent) the expected for this time of day. Most of the activity is in the May 35/30 and April 35/30 put spreads. Both spreads traded 3000 times and it seems that the same buyer was opening similar bearish spreads in both the April and May expiration months.

Implied Volatility Movers

National Semi (NSM) is down 22 cents to $11.48 and options volume is running at 2X the average daily after the company reported earnings and announced plans to cut 26 percent of its work force. Implied volatility is down to 71, from about 78 late yesterday, amid active selling of March 10 put options.

Implied volatility is also lower in JP Morgan (JPM), Legg Mason (NYSE:LM), and Goldman Sachs (NYSE:GS). Meanwhile, implied volatility is elevated in McKesson (NYSE:MCK), TBS International (NASDAQ:TBSI), and Alcoa (NYSE:AA).

Source: Wednesday's Options Recap