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Sentiment
Stocks showed 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 (AXP), General Electric (GE), McDonald's (MCD), and Pfizer (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 was up 30 points heading into the final forty-five minutes of trading, with JP Morgan (JPM), Citi (C), and HP (HPQ) leading the industrial average in late-day action.

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

Bullish Flow
Axsys Technologies (AXYS) was 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 ran at 22X the normal levels, with 6,300 calls and 1,400 puts traded. Most of the activity was in the Mar and April 35 calls. While some of the higher strikes were seeing some volume, the overall trading in the options market seemed to reflect skepticism about the company's ability to get a price significantly greater than current levels.

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

Freeport McMoran (FCX) was up $.73 to $34.90 and 83,000 calls traded, compared to 27,000 puts. The top trades of the day were in the May 35 and 40 calls after a strategist apparently bought the spread 24000X for $2.15 on the NYSE.

Bearish Flow
Starwood Hotels (HOT) puts were active. Shares were up $.41 to $11.74 and traders showed 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. presented Wednesday at the Raymond James Institutional Investor conference.

Vulcan Materials (VMC) was up $.19 to $36.54 and 13K puts traded, or about 6 times (612 percent). Most of the activity was in the May 35/30 and April 35/30 put spreads. Both spreads traded 3,000 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) was down $.22 to $11.48 and options volume was running at 2X the average daily after the company reported earnings and announced plans to cut 26 percent of its work force. Implied volatility was down to 71, from about 78 late Tuesday, amid active selling of March 10 put options.

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

Source: Wednesday Options Review: Signs of Unusual Activity