Thursday Options Recap

Sentiment

The major averages are lower Thursday, as early gains in the financials weren't enough to offset weakness in other sectors like energy and technology stocks. AmEx (AXP) is up 3.4 percent and the best gainer in the Dow Jones Industrial Average after the company said conditions in the credit card market were seeing some long-awaited signs of improvement. However tech stocks were weak after Cisco Systems (CSCO) reported so-so earnings, and commodity-related names are lower on sluggish trading in the crude oil and metals markets.

Trading is also cautious ahead of tomorrow's key jobs data. On Thursday, the Labor Department reported that weekly jobless claims fell by 34,000 to 550,000 in the week ended August 1. The number was much better than economists had expected. They were looking for a drop of only 4,000. Yet, while the claims numbers were strong, sentiment remained cautious ahead of Friday's numbers, which are expected to show the economy losing 330,000 jobs in July and an unemployment rate of 9.6 percent.

In the options market, volume and volatility are a bit higher: 6 million puts and 6.6 million calls traded so far, a ratio of .92 (compared to a 22-day average of .82). With 45 minutes left to trade, the CBOE Volatility Index (.VIX) was up 1.18 to 26.08.

Bullish Flow

Seeing some interest in the solar names today. Canadian Solar (CSIQ) is up $3 to $19.12 and options volume is running 5X the usual on earnings news. Outside of that, trading is mixed. Suntech (STP), SunPower (SPWRA), and GT Solar (SOLR) are lower. JA Solar (JASO) and China Sunenergy (CSUN) are flat. Meanwhile, Solar Fun (SOLF) is up 30 cents to $7.76 and options volume is running 4X the usual on increasing interest in August 7.5 and 10 call options. More than 4,000 contracts traded and, with more than 75 percent hitting ask-side, it looks like buyers dominating the action and looking for additional upside in SOLF. (SOLR Aug 7.5 calls seeing interest as well).

Bearish Flow

Two big prints in the Qs (QQQQ) today. One was a recent block of 80K Dec 20 puts for 6 cents, traded b/d-to-b/d. It looks buyer-initiated (opening) and possibly some "disaster insurance", as the Qs are trading for $39.38 and the Dec 20s are 49.2 percent OTM. Another block of 46.7K Aug 38 puts traded for 35 cents and is possibly a closing trade, as existing interest is more than 391K. 106K Aug 38 calls now traded. Implied vols in the Qs, as measured by the QQV index, is up 1.12 to 24.35.

Implied Volatility Movers

Procter & Gamble (PG) is down 5 percent following negative comments from CNBC commentator Jim Cramer. The stock is down and options volume is running 3X the normal levels, 46,000 puts and 39,000 calls traded. Implied volatility is running above 25, from about 23.5 the day before.

Implied volatility is also higher in Align Tech (ALGN), Wells Fargo (WFC), and Starwood Hotels (HOT). Meanwhile, implied volatility is lower in Williams (WMB), Cisco (CSCO), and Canadian Solar (CSIQ).

Comments

[HipHoption:]

The QQQQ Aug09 38P trade was opening. The client actually bot 75k for around 0.35. I agree that the QQQQ Dec09 20P were most likely a disaster hedge ...

Aug 06 09:58 PM