Thursday Options Recap

Sentiment

Stocks battled back from early losses and are trading mixed late Thursday. The major averages slipped shortly after the opening bell, even as the day's economic data held no major surprises. According to numbers released before the opening bell on Wall Street, the US economy contracted at a 1 percent annual rate during the second quarter; which isn't great news, but better than economist estimates of -1.5 percent.

Meanwhile, the latest weekly jobless claims fell a bit less than expected. According to the Labor Department, filings for jobless benefits decreased by 5,000 to 570,000 last week. Economists were looking for a drop to 565,000.

Investors seemed to largely overlook the economic data, however, and the major averages sank in early trading. The Dow Jones Industrial Average was down more than 80 points the first hour. There didn't seem to be one specific catalyst for the morning decline, but crude oil also made a run below $70 a barrel Thursday morning.

However, the Dow Jones Industrial Average dug out of a hole midday with help from the financials. Citi (C) is up 43 cents to $5.06 on news hedge fund manager John Paulson has taken a 2 percent stake in the company. Meanwhile, Boeing (BA) is helping the Dow. Shares are up 8.6 percent after the company announced plans for its first Dreamliner flight later this year. Crude oil battled back and is now up $1.23 to $72.66.

With 45 minutes left to trade, the Dow Jones Industrial Average has added 43 points on the day and 125 from its morning lows. The NASDAQ is down .7 ahead of earnings from Dell Computer. The CBOE Volatility Index (.VIX) hit a high of 25.89, but was recently down .28 to 24.67. Trading in the options market picked up from the day before. Approximately 5.2 million puts and 6.2 million calls traded so far (a ratio of .85, compared to a 22-day average of .79.)

Bullish Flow

Dryships (DRYS) is seeing a day of active trading. Shares are up 54 cents to $6.23 along with the other dry bulk shippers (DSX, EXM, EGLE) after China's COSCO reported a smaller-than-expected loss for the first half of 2009. DRYS is leading and trading is active, with 60,000 calls and 12,000 puts changing hands. Sep 6 and 7.5 calls are the most actives, with 23.6K and 13.1K traded, respectively, and about 70 percent hitting ask-side. Average implied volatility is up to 69, from about 67 late Wednesday.

Bearish Flow

Tech Data (TECD) is up 23 cents to $39 and options volume is running 7X the usual. 3,180 puts and only 77 calls traded so far. October 40 puts are seeing most of the flow, with 2,880 traded. 96 percent hit ask-side and existing open interest is 35 contracts. ISEE data (at 91 percent or 1809 contracts) confirm that investors are buying puts to open new positions in TECD Thursday. Implied volatility (average) is edging up to 33.5, from about 32 Wednesday.

Implied Volatility Movers

NCI Building Systems (NCS) hit a low of $2.10 per share and was recently down 85 cents to $2.63 after the co. said it had obtained extensions of wavers from its banking group and also entered into negations with investors. The stock sank on the news and trading is brisk in Dec, Jan10, and Mar10 2.5 calls. Implied volatility (average) is up to 175, from about 161 late Wednesday.

Implied volatility is also higher in Ambac (ABK), MBIA (MBI), and Massey Energy (MEE). Meanwhile, implied volatility is easing in Jo-Ann Stores (JAS), eLong (LONG), and Fred's (FRED).