Sentiment
Stocks are trading mixed late Wednesday. Alcoa (AA) was in focus early after the aluminum company unofficially kicked off the earnings-reporting season by posting a 59-cent per share loss for the quarter, which was two cents worse than analyst expected. AA gained 3 percent, however, after the revenue number exceeded expectations. Meanwhile, insurance companies rallied on news the government is expanding the bailout to help the struggling insurers. Some of the homebuilders also rallied early on merger news: Pulte Homes (PHM) announced plans to buy Centex (CTX).
The morning rally ran out of gas midday, however, and a bit of selling pressure surfaced late following the release of minutes from the latest FOMC meeting. While the text held no major surprises, and the Fed mostly re-hashed the same concerns about the housing market, employment, and the economy, the negative underlying tone of the economic outlook seemed to prompt a bit of selling, most notably in the financials.
BofA (BAC) buckled and is the biggest loser in the Dow -- off 4 percent. Trading in the options market is on the light side, with approximately 5.7 million calls and 4.5 million puts traded so far.
Bullish Flow
Shares of Chinese video game and software maker Shanda Interactive (SNDA) are up $2.77 to $45.35 and hit new record highs of $46.14 today. There is no obvious company-specific news to explain the rally. Meanwhile, options activity is running 3X the average daily levels, with 14K calls and 3000 puts traded. April 45 calls are the most actives. 7000 traded and about two-thirds hit ask-side of the bid-ask spread. Looks like buyers taking positions on hopes the rally can continue before the options expire at the end of next week.
Eli Lilly (LLY) is seeing bullish order flow. Shares of the pharmaceutical company are up 48 cents to $32.36. In the options market, traders are focused on May 37.5 and May 40 calls, with 5,900 and 1,190 contracts traded, respectively. Volume exceeds existing open interest and about 80 percent hitting ask-side. ISEE sentiment data points to opening customer call buys as well.
Bearish Flow
Textron (TXT) is down 15 cents to $8.87 and morning options trades include 1471 June 9 puts bought for $1.90 and 1930 June 7.5 puts bought for $.20. September puts at the 5 and 6 strikes are the most actives. Looks like buyers dominating the flow in the Sept contracts as well, which stands in stark contrast to the action earlier in the week when traders were bidding up TXT calls on takeover chatter.
Micron Technology (MU) is down 14 cents to $4.17 after the company announced plans for a $450 million offering of common stock and convertible senior notes. It plans to offer 55.3 mln shares. Dilution concerns are weighing on MU and some players in the options market seem to expect additional downside. The top trade of the day, 5000 April 4 puts for 25 cents on the ISE, where sentiment data indicate an opening customer put buy. 16K puts traded total, compared to 1500 calls.
Implied Volatility Movers
SVB Financial Group (SIVB) shares are down 21.45 percent to $16.42 after the company pre-announced a first quarter loss of between 28 and 36 cents per share. 11 analysts covering the company were looking for 22 cent profit. Options volume is running at 5X the usual on the news and implied volatility is up to 91.4 from about 85 the day befoe.
Implied volatility is also higher in Teck Cominco (TCK). Meanwhile, implied volatility is easing in General Motors (GM), Bed, Bath and Beyond (BBBY), and Hartford (HIG).
