Tuesday's Options Recap

Sentiment

Stocks are trading lower, as investor sentiment remains cautious heading into tomorrow's FOMC announcement. With the earnings calendar slowing down and a light economic calendar (productivity and wholesale inventories = yawn), there wasn't a lot of news to guide the market action Tuesday morning. Instead, focus seems to shifting to tomorrow's FOMC announcement and retail sales data on Thursday.

The financials are seeing relative weakness. CIT (CIT) is down 16.2 percent after delaying the release of its earnings report. BofA (BAC), GE (GE), JPMorgan (JPM), and Traveler's (TRV) are the biggest losers in the Dow Jones Industrial Average. However, the weakness isn't limited to the financials. 359 S&P 500 stocks are lower. 133 trading higher.

Heading into the final hour, the Dow Jones Industrial Average is in the middle of today's 117 point range and is down 72 points. The CBOE Volatility Index (.VIX) made a run towards 27 and was recently up 1.05 to 26.04. Trading in the options market is picking up, with approximately 5.1 million puts and 6.4 million calls traded so far (a ratio of .79, compared to a 22-day average of .80.)

Bullish Flow

Onyx Pharmaceuticals (ONXX) fell 14.7 percent last Wednesday on news it was planning to raise cash in a secondary offering (although it sits on $500 mln in cash) and then stumbled again yesterday after BMO Capital Markets cut the stock to Market Perform from Out Perform. Sentiment in the options seems somewhat bullish Tuesday, however, as 3800 calls traded, or 5X the expected for midday trading. The top trade is 2,021 Jan10 35 calls for $2.90 on ISE, an opening customer buyer, according to ISEE data. 2,560 now traded, with 88 percent hitting ask-side. Implied volatility (average) is near 50 percent and not much changed since yesterday.

Bearish Flow

SPDR Retail Trust (XRT) is down 49 cents to $31.32 and recent trades include 5000 Dec 27 - 31 put spreads, bought, along with the sale of 5000 Dec 34 calls. They collected .025 cents for the package. It traded more than once and volume in all three contracts is roughly 10K. Looks like a bearish position opened ahead of retail sales data Thursday along with earnings from Wal-Mart (WMT)and a handful of other retailers later this week.

Implied Volatility Movers

TCF Financial Corp (TCB), a Wayzata, MN money center bank, is down 90 cents to $14.33 and implied volatility is moving higher Tuesday. Oct 12.5s are the most actives, with about 5,900 traded and 81 percent trading ask-side, mostly on the PHLX for 60 cents. Looks like Jan10 12.5, Oct 15, and Jan10 15 puts being bought as well. Meanwhile, implied volatility (average) is moving up towards 49, from about 46 late yesterday.

Implied volatility is also higher in Fannie Mae (FNM), Freddie Mac (FRE), and the SPDR Homebuilders Trust (XHB). Meanwhile, implied volatility is lower in AgFeed (FEED), Fluor (FLR), and Qwest Software (QSFT).