Friday's Options Recap

Sentiment

Stocks are trading broadly lower heading into the final hour of trading Friday. With no economic data on the calendar and not much corporate news to move the market, the major averages opened flat and traded in a narrow range throughout the morning session. Some sellers surfaced midday, however, and the Triple Witch options expiration might be fueling a bit more volatility than normal as well.

BofA (BAC) is the biggest loser in the Dow Jones Industrial Average after the Financial Times reported that the bank was directly linked to Merrill writedowns, which contributed to Merrill's $15.3 billion loss in the last quarter of 2008. BAC is down 10.5 percent to $6.20. AmEx (AXP), Caterpillar (CAT), and JPM (JPM) are also among the Dow's biggest losers, and the industrial average is down 100 points.

In the options market, trading is active, as players square positions ahead of the expiration. Today is the last day to trade remaining March contracts. 7.8 million calls and 6.7 million puts have traded so far. Risk perceptions are higher for a second day. After rallying 3.6 points Thursday, the CBOE Volatility Index (.VIX) is up another 3.52 to $47.2.

Bullish Flow

Yamana Gold (AUY) is up 10 cents to $9.34 and the Mar 8/Apr 9 call spread is active for a second day. Looks like a strategist collected 30 cents, 10000X. Like yesterday, it appears to be an expiration-related roll of calls from March to April and up one strike price, with the investor looking to maintain a bullish position in the gold miner through the April options expiration (28 days). After a $69 rally yesterday, gold is down $5.8 to $953 an ounce.

iShares Taiwan Fund (EWT) is down 24 cents to $7.7 and 11,000 April 8 calls have traded. Most of the volume has been on the AMEX and appears to be speculative call buying (30 and 35 cents) in anticipation of gains in Taiwan's equity markets between now and April options expiration (28 days).

Bearish Flow

Concur Technologies (CNQR) is down $3.23 to $19.44 and directional sentiment is bearish amid increasing interest in April 20 puts. 1,680 contracts traded, with buyers dominating the order flow. There is nothing obvious on the news front to explain the relative weakness in shares or increasing options activity in the Redmond, WA software company.

New York Com Banc (NYB) is down 30 cents to $10.41 and 5,410 puts traded so far, or about 10X (1032 percent) the expected for midday action. April 10 and July 7.5 puts are the most actives, with 3,253 and 1,809 contracts traded, respectively

Implied Volatility Movers

Morgan Stanley (MS) implied volatility is lower after spiking higher over the past two days. The stock came under pressure mid-week after JP Morgan analysts warned Morgan Stanley might need to raise more capital. MS shares are steady today, up 7 cents to $21.11 and implied volatility is back down to 123, from about 130 the day before.

Implied volatility is also lower in Citi (C), Palm (PALM), and Prudential PLC (PUK). Meanwhile, implied volatility is elevated in General Motors (GM), Consolidated Graphics (CGX), and Macerich (MAC).

Comments

[rayman:]

ahh tried to get some MS long today with a cheap shot $21 MAR call
no dice, oh well, couldn't hold that level....
out $55.......maybe next time, felt more comfortable with that risk/reward than holding it long over the weekend if the market couldn't see any strength
teens maybe? who knows......still like MS for some strange reason. I thought about shorting MAC puts today, but not quite yet.

Mar 20 08:14 PM

[MarvinMBA:]

Trying to play this market is like walking thru a minefield...danger at every step...keep out for awhile as Uncle Sam is tries to revive a Economic Model that is DOA and resurrection is impossible...too bad but we are going to have to start a new economy all over...socialism anyone???

Mar 22 02:04 AM

[rayman:]

FRED, you STINK
(being sarcastic of course)
nice day in the markets today, thanks for all your contributions, they are absolutely INVALUABLE ;)

Mar 23 05:46 PM

[Repsonsible...:]

Anybody who voted for "change" can Forget it , Sec of State Timmy will protect his Big Bank Crooked buddies at ALL costs . So its Business as usual and who's WS s biggest protector NOW ,, why its OBAMA , who PROMISED to GET The Bad Actors on WS ,, course that was before he got elected. This New Bad asset plan is a reworked Paulson plan that was rejected last year course this time the FDIC (You the TAX payer will be on the hook for 84% of bill)Sweet deal for the Banks they get Rid of ALL there Bad loans and Hedge Funds get loans to buy it from FDIC ,, if they turn out good they make BIG Profits,, if NOT YOU that Tax payer will take the 96% of the Loses ! Its the Ultimate Ponzi scheme and The People playing Banks and Hedge funds Can't LOSE ! Change NO just more of the same old crap only now Obama is one of the Good ol boys instead of Bush ! Did'nt take LONG FOR WASHINGTON and Wall St to get Mr. Obama Straightened out did it ?
Then There was something about getting ALL the Troops out of Iraq too was'nt there ? But NOW we will be leaving 50,000 permantly , just a small security force You understand , ya right ! Good move Mr. Obama
And All You Greenies sorry by end of the year All that Green Energy talk ,Green jobs ect , well that just wont be practical to do after all sorry folks . But We'll throw a few more billion tax dollars at it but bottom line is,,, 10 years from now 97% of cars will still be burning Gasoline and 90% Of electrcity will still come from Coal and Nuclear.
You wanted Change will about the only change You folks will be getting the next 4 years is the change You get back from your value meal at Mc Donalds . Bottom Line You all Got hood winked into voting for a smart guy from Harvard POSING as a left wing Democrate. And after 60 days its starting to become clearer everyday that he wasnt being quite truthful in the things he said he believed or planed on doing after he was Elected . ! NO Wonder John
McCain had that Big Grin on his face a week after the election !!

P.S. In case You missed 60 mniutes last night Obama all but apologized to AIG execs for that angry Congress that tried to Pass a Nasty Tax on there ''Bonuses"

Mar 23 07:48 PM