Friday's Options Recap

Sentiment

Stocks are trading mixed in a day of relatively uneventful action Friday. Economic data was in focus early. Before the opening bell on Wall Street, stock index futures showed little reaction to the latest personal/income spending report. Released at 8:30 a.m. eastern time, the data showed spending increased by .3 percent and incomes up 1.4 percent in May. Economists were looking for .3 percent gains in both incomes and spending.

A little later, the University of Michigan sentiment index showed some improvement. The index finished the month of June at 70.8, up from 69 earlier in the month and better than the 69 economists had predicted. Yet, the market showed little reaction to the news.

Instead, it's been rather quiet trading and the Dow Jones Industrial Average has been in a narrow 68 point range. The Industrial Average is down 39 points heading into the final 40 minutes of trading. The NASDAQ is up 3 points and outperforming with help from PALM, which rallied 15 percent on earnings news. The CBOE Volatility Index (.VIX) dipped .21 to 26.15 and volume is slowing heading into the weekend. Approximately 3.7 million puts and 4.4 million calls traded, a ratio of .86 (compared to a 22-day average of .76).

Bullish Flow

Silver Wheaton (SLW), a Vancouver-based silver miner, is down 2 cents to $8.79, even after silver (July) finished up 8.5 cents to $14.09 Friday (down 11 cents on the week.) In the options market, SLW volume is running 2X the usual. 15,000 calls and 905 puts traded. The top trades of the day: 4000 July - Sept call spreads bought for 55 cents. While tied to stock, the action (possibly a roll) seems to reflect the view SLW might stay below $10 through July expiration (3 weeks) and then move higher from that point forward.

Bearish Flow

Ross Stores (ROST) is down 34 cents to $38.38 and options volume is running 8X the usual, with 9,100 puts and 1,100 calls traded. Most of the action in the puts is due to one strategy, which appears to be part of a "tree". To be specific, it looks like an investor bought 3,000 August 37.5 puts for $1.80, while selling 3,000 August 35 puts for 95 cents and 3,000 August 32.5 puts for 40 cents. If so, they paid 45 cents and stand to make $2.05 if ROST falls to $35 (9 percent) by the August expiration.

Implied Volatility Movers

Implied volatility picked up in French pharmaceutical make Sanofi (SNY) after Reuters reported researchers will soon publish a report suggesting the company's Lantus has been linked to cancer. Shares are down 6 percent, to $28.37, and implied volatility is up to 44 today, from 40 yesterday and the mid-30s one week ago.

Implied volatility is also higher in Amylin Pharmaceuticals (AMLN), ETFC, and Citrix Systems (CTXS). Meanwhile, implied volatility is lower in Palm (PALM), KB Homes (KBH), and Potash (POT).

Comments

[jdl51:]

So you want to destroy the American economy to give Goldman a lesson. Another repug pseudo-patriot.


On Jun 26 07:04 PM money hardball wrote:

> Goldman and Bank of America run the markets along with Geithner,
> and beagle boy Ben. There is no free markets, only welfare capitalism
> and socialism for capitalism.
>
> hat tip to investmintideas.blogsp.../ for the good articles
>
>
>
> To stop the New World Order I implore people to save more money.
> Stop spending in order to make the economy shrink. If consumers de-leverage,
> so will these financial firms, too. Their grip on society is lessened
> when we stop playing into their debt/consumption trap.

Jun 27 11:18 AM