Thursday's Options Recap

Sentiment

The major averages opened higher Thursday after JPMorgan (JPM) said it earned 40 cents per share for the quarter, which beat Street views by 8 cents. Although the financials faltered early, and the Select Sector Financials (XLF) hit a morning low of $10.58 per share, a midday sell-off attempt was met with renewed buying interest. The XLF, which holds all of the financial-related companies from the S&P 500, is up .25 to 11.10 heading into the final 40 minutes of trading.

Technology stocks are outperforming. The group is battling back from losses suffered Wednesday when Intel (INTC) failed to provide clear guidance for the months ahead. The tech-heavy NASDAQ, which gained just 1-point Wednesday, is up 46. Hewlett Packard (HPQ) is up 5.6 percent and the best gainer in the Dow Jones Industrial Average. The Dow is up 125 points.

The day's economic news showed some improvement. A report on weekly jobless claims released early was better-than-expected. Filings for jobless benefits 53,000 to 610,000 last week, which was significantly better than the 3,000 decline economists had predicted. Meanwhile, the Philadelphia Fed Manufacturing Index moved to -24.4 in April, up from -35 and better than economist estimates of -32. The one downer: data released early showed housing starts falling to an annualized rate of 513,000 in March, down from 564,000. Economists were looking for a decline to 549,000.

Meanwhile, the options expiration might be exacerbating market moves. Today and tomorrow are the final days to trade April options before the contracts come off the board. Trading is brisk, with approximately 9 million calls and 6.9 million puts traded so far. The CBOE Volatility Index (.VIX) is down .95 to 35.22 and on pace to close at its lowest levels since September.

Bullish Flow

Google (GOOG) shares are up $10.83 to $390.33 ahead of earnings. Analysts expect the internet giant to post quarterly profits of $4.93 per share, up from $4.84 a year ago. The whisper number, excluding items, is $5 even. The activity in the options market seems to reflect some optimism as well. 66,000 calls and 55,000 puts traded, or about 4X the expected volume for midday trading. April 390 call options are the most actives, as some players position for an upside surprise. Meanwhile, implied volatility has edged down to 51 from 54 and a skew between the April and May contracts hints at a possible earnings gap move of $23, or 6 percent, when GOOG releases results after the closing bell.

Fannie Mae (FNM) is unchanged at 90 cents and seeing some speculative buying in FNM May calls at the $1 strike and Jan-2010 calls at the $2.5 strike. 9000 traded so far, with about 73 percent hitting ask-side. Similarly, ISE sentiment data points to 62 percent opening customer call buys.

Bearish Flow

Gamestop (GME) is down 90 cents to $31 the day after the company's CEO appeared on CNBC noting that Nintendo Wii demand could slow and Nintendo might want to consider a price cut, perhaps raising fears of demand slowdown in the industry. In addition, Target (TGT) announced a new program today, which allows customers to buy reservation cards for new game purchases, which can later be redeemed for a $5 gift card. The move is possibly seen as a threat to video-game retailer, Gamestop. Shares are down and some investors appear to be bracing for additional volatility in GME ahead of the weekend. April 32 and 30 puts are the most actives.

News Corp. (NWS) is up 19 cents to $8.67 and sentiment in the options market is bearish on increasing interest in May 10 puts. 4,223 contracts traded and 98 percent hit ask-side. The top two trades: 1300 and 990 contracts for $1.60 on the ISE, where sentiment data indicate opening customer put buys.

Implied Volatility Movers

Regions Financial (RF) implied volatility is lower after the company said at its annual shareholder meeting that it expects to see a profit in the first quarter. Analysts were expecting a substantial loss. RF is up $1.35 to $6.35 and implied volatility is easing to 130, from about 141 the day before.

Implied volatility is also lower in General Electric (GE), Harley Davidson (HOG), and Citi (C). Meanwhile, implied volatility is higher in State Street (STT), Wells Fargo (WFC), and Travelzoo (TZOO).