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Sentiment

The major averages slipped early in the day after ADP reported that the US economy lost 298,000 private sector jobs during the month of August. Stock index futures slipped on the news, as economists had predicted a smaller decline of 213,000 and the data comes two days ahead of the Labor Department's monthly payroll report. Economists expect Friday's report to show the economy losing 225,000 jobs.

The day's other economic news didn't inspire much enthusiasm. A report released before the bell showed second quarter productivity increasing at 6.6 percent rate, which was slightly better than expected. However, a separate report released during market hours showed Factory Orders increasing just 1.3 percent in July, which was below economist estimates of 2.2 percent.

The release of minutes from the latest Federal Reserve meeting on monetary policy didn't do much either. Fed officials noted that job losses are abating, but credit still isn't flowing. No surprises there.

Consequently, things appear to have settled down after yesterday's slide, despite a round of generally lackluster economic news. After a 185-point dive Tuesday, the Dow Jones Industrial Average has traded in a narrow 69-point range and, with an hour left to trade, is down 10 points. The CBOE Volatility Index (.VIX) slipped .57 to 28.58. Trading is a bit slower than Tuesday, with approximately 5.5 million puts and 5.8 million calls traded so far (a ratio of .96, compared to a 22-day average of .80.)

Bullish Flow

Gold was in focus Wednesday. The precious metal rallied $21.80 to $91.40 and the move sparked a flurry of activity in the gold mining names. For example, Gold Fields (NYSE:GFI) gained $1.16 to $13.02 and options volume rose to 8X the average daily levels, with 23,000 calls and 3750 puts traded on the day.

Active trading also surfaced in Agnico Eagle Mines (NYSE:AEM), Yamana Gold (NYSE:AUY), Goldcorp (NYSE:GG), Anglogold (NYSE:AU), Golden Star Resources (NYSEMKT:GSS), Newmont Mining (NYSE:NEM), Barrick Gold (NYSE:ABX), SPDR Gold Trust (NYSEARCA:GLD), Market Vectors Gold Fund (NYSEARCA:GDX), and Ultra Gold Fund (NYSEARCA:UGL).

Bearish Flow

Oracle (NYSE:ORCL) puts are active, as the software maker awaits EU approval of its deal with Sun Micro (JAVA). A decision is expected on Sept 3, but EU officials are deciding whether to open an in depth four-month review of the deal or give it immediate clearance [Reuters]. Looks like some investors are taking defensive positions in ORCL ahead of the decision. Shares are down 20 cents to $21.74 and one player bought 17K Dec 20 puts for 94 cents per contract. 18.6K now traded. Another paid $1.40 for Dec 21 puts 5000X.

Implied Volatility Movers

Tibco Software (NASDAQ:TIBX) is up 22 cents to $8.89 and implied volatility is higher on takeover chatter. SAP (NYSE:SAP) is possibly eying TIBX. Similar talk surfaced on Aug 10. Today, TIBX Sep 10, Oct 10, and Oct 12.5 calls are seeing some interest. Implied volatility (average) is heading up to 66.5, from about 62 late Tuesday.

Implied volatility is also higher in Fannie (FNM), Freddie (FRE), and AIG (NYSE:AIG). Meanwhile, implied volatility is easing in Imergent Inc (IIG), Verifone (NYSE:PAY), and Donaldson Co. (NYSE:DCI).

Source: Wednesday's Options Recap