Tuesday's Options Recap

Sentiment

Stocks bounced back from two days of losses and moved broadly higher Tuesday. End-of-quarter window dressing is possibly helping stocks find a bid. In addition, the stage was set for early gains on Wall Street after bank stocks led European markets higher Tuesday. UK's FTSE rallied 4.3 percent and France's CAC 40 Index gained 3.4 percent ahead of the highly anticipated meeting of G-20 finance ministers and central bankers Thursday in London.

In the US, stocks opened higher and the major averages found some upside momentum despite another round of bleak economic numbers. A report released pre-market showed average home prices falling 19 percent in January, which followed an 18.6 percent decline the month before. Another report released 15 minutes into the trading session showed further contraction in the manufacturing sector. The Chicago Purchasing Manager's Index [PMI] fell to 31.4 in March, down from 34.2 in February and well below economist estimates of 34.3. Finally, an index of consumer confidence showed little improvement this month, edging up to 26 from 25.3 in February. Economists were expecting an increase to 28.

Yet, after a 2-day 403-point drop, the Dow Jones Industrial Average showed some resilience and is up 170 points late Tuesday. GM (GM) is down 20 percent and the only Dow stock in negative territory. The financials, Alcoa (AA), and Microsoft (MSFT) are leading the industrial average to higher ground. In the options market, trading is on the light side. Approximately 5.2 million calls and 4.2 million puts traded so far. The CBOE Volatility Index (.VIX) is down 2.82 to 32.72 heading into the final forty-five minutes to trade.

Bullish Flow

Apple Computer (AAPL) April 80/95 and May 90/100 put spreads both trade 10000X today, after a strategist bought the April spread and sold May, according to an exchange-floor contact. Shares are up 88 cents to $105.37 and the activity is possibly rolling forward of a successful April put spread accumulated over recent months. For example, on Jan 22, the April 80/95 put spread was sold for 3000X for $7 when AAPL was near $89.00. It appears that spread is now being bought back at about a $6 profit.

Suntech Power (STP) is up $1.50 to $12.45 and calls are active, as some of the solar names see relative strength Tuesday. 13,000 calls and 1,400 puts traded. JASO, YGE, TSL, LDK, SOLF, and SOL also seeing gains. CSIQ is leading the way after Piper upgraded the stock to Neutral from Sell saying, among other things, $30 bln in Green stimilus from China is under way and a positive catalyst for CSIQ.

Cliffs Natural Resources (CLF) is up $1.40 to $17.91 and calls are heavily traded as unsubstantiated takeover chatter makes the rounds Tuesday. 19,000 contacts traded, compared to 2,200 puts. Speculative buying is being seen in April 17.5, 20, and 22.5 call options.

Bearish Flow

Worthington (WOR) puts are active and implied volatility is elevated ahead of earnings (tomorrow, before market). Shares are down 20 cents to $8.69 and April 7.5 puts are the most actives, with more than 5000 traded. The top trades are two blocks of 2,050 contracts ask-side for 35 and 40 cents. Implied volatility is up to 95.7 from about 88 the day before.

Ford Motor (F) is down 6 cents to $2.70 and April puts at the $2 strike are active ahead of monthly auto and truck sales numbers due out tomorrow. More than 9000 contracts traded so far. Recent trades include a multi-exchange sweep of 5000 contracts at the offer for a dime.

Implied Volatility Movers

Acorda Therapeutics (ACOR) implied volatility is elevated, as shares take a hit Tuesday. ACOR is down $4.60 to $20.30 after the company received a refuse to file letter from the FDA related to its NDA for Fampridine-SR. The FDA raised some "format issues" and requested that some data in the application be reformatted. The stock sank and implied volatility rose to 85, from about 75 the day before.

Implied volatility is also elevated in General Motors (GM), Black and Decker (BDK), and Worthington (WOR). Implied volatility is easing in Citi (C), Wells Fargo (WFC), and BofA (BAC).

Comments

[Repsonsible...:]

This Market is going down way down , probbaly to 5000 and when it goes it will just take a few days , NOT weeks then afterwards it could trade between 4500- 5500 for months if not YEARS ! And of Course CNBC has gotten RID of anyone who was being straight with the people trying to tell the truth guys like Radagin , Haines , ect , now all that You'll see left are The Shills for the Brokerage industry, the "Its a buying opprotunity Crowd" the Yes Men , Headed By The Supreme SHILL BUY BUY BUY Crammer ! But In Reality Things are Bad and getting WORST everyday! Do Your own research you will see. All I Own now is Gold and cash been there for months . So thats my opinon , course I coud be wrong But I wouldnt bet my money on it !

Mar 31 04:32 PM

[HipHoption:]

At what point was VIX at 32.72 today?

Mar 31 11:27 PM

[Fred Ruffy:]

Typo. sorry, should be 42.72.

Apr 01 09:59 AM

[winindthedust:]

The Market is 90% about media presentation & mood of investors, and 10% about company fundamentals. Your gold play is also speculative, because of this.

The only way, that we get to where you say, is for people in general to run out of money to spend. To do that, they need to be jobless. We are very far from the mass unemployment of the 30's. It wasn't just the stock market that crashed, it was entire industries and businesses going under, creating a mass money panic in all sectors. This money panic, saw profitable businesses pull back, and rather then fill the void that normally would take place, wide spread unemployment ensued. This turned into a domino affect cycle. Could this happen again? Yes. But people are still spending money, their hasn't been a run on the banks, and unemployment numbers are rather stable, if not optimistic. It really is all about mood & perception. Yes, the gov. really messed up with Freddie & Fannie, but the flames were fanned by irresponsible politicians and reality TV news media where self-fulfilling "bad news sells".

So- is the sky falling? Not yet, not until emotion & fear completely takes over, and we're not even close to that yet.

On Mar 31 04:32 PM Repsonsible Citizen wrote:

> This Market is going down way down , probbaly to 5000 and when it
> goes it will just take a few days , NOT weeks then afterwards it
> could trade between 4500- 5500 for months if not YEARS ! And of Course
> CNBC has gotten RID of anyone who was being straight with the people
> trying to tell the truth guys like Radagin , Haines , ect , now all
> that You'll see left are The Shills for the Brokerage industry, the
> "Its a buying opprotunity Crowd" the Yes Men , Headed By The Supreme
> SHILL BUY BUY BUY Crammer ! But In Reality Things are Bad and getting
> WORST everyday! Do Your own research you will see. All I Own now
> is Gold and cash been there for months . So thats my opinon , course
> I coud be wrong But I wouldnt bet my money on it !

Apr 01 12:16 PM