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The major averages are trading modestly lower, as the underlying tone remains cautious after fears about renewed problems in the credit world sent global equity markets sharply lower late last week. With no earnings of significance and a light economic calendar, persistent worries about Dubai's debt debacle weighed on early trading Monday.

The major averages saw a modest lift mid-morning, however, after the latest Chicago Purchasing Manager's Index [PMI] improved more than expected. The gauge of regional manufacturing activity rose to 56.1 in November, better than the 54.2 in October and also ahead of the 53.1 economists had predicted.

A rebound in crude and gold seemed to help keep a floor under the stock market averages as well. Crude oil has erased early losses and is up $1.09 to $77.14 a barrel. Gold gained $1.80 to $1177.30 an ounce.

With less than an hour left to trade, the Dow Jones Industrial Average is down 14 points. The NASDAQ lost 7. The CBOE Volatility Index (.VIX) is back in the mid-20s. Trading in the options market has become a bit more defensive, with approximately 4.5 million puts and 4.5 million calls traded so far (a ratio of 1.04 compared to a 22-day average of .81.)

Bullish Flow

Emulex (NYSE:ELX) is off 12 cents to $9.74 and testing early November support. In the options market, volume is running 4X the usual on increasing interest in Dec 10 calls. The top trade is 2231 contracts at 30 cents on ISE, which is an opening customer buyer, according to ISEE data. 4400 contracts now traded vs. 2443 in open interest. No headlines on the co. today.

Archer Daniels Midland (NYSE:ADM) slipped 25 cents to $30.40 and early trades included lots of Dec 31 calls at the offer for 45 and 50 cents. 2175 now traded vs. 3892 in open interest. Co. is due to present at a Citi Food Fest Manufacturing Conference on Dec 3.

Bearish Flow

AIG (NYSE:AIG) is down $4.30 to $29 and near session lows after a Bernstein analyst warned the company's property and casualty insurance biz could face up to $11 bln in reserve defiency next year. In the options, Dec 25 and 30 puts are seeing brisk trading, with 25.K and 20.8K traded, respectively. The top trades include a "stupid" spread where an investor bought both contracts at $1.91 (total), 5000X. Looks like buyers of Dec 17.5 and 20 puts as well.

Implied Volatility Movers

Apollo (NASDAQ:APOL) options are up and implied volatility is higher on unsubstantiated talk about positive developments related to a recent SEC inquiry into the company's financials. 14,000 calls and 4,333 puts traded. Implied volatility is up to 63.8, from about 61 late Friday.

Implied volatility is also higher in Emulex (ELX), Staples (NASDAQ:SPLS), and AIG. Implied volatility is easing in CSG Systems (NASDAQ:CSGS), Origin Agritech (NASDAQ:SEED), and Wuxi Pharm (NYSE:WX).

Unusual Volume Movers

Sun Micro (JAVA) is seeing 2X average daily trading volume, with 222,000 contracts traded and put volume representing 94 percent of today's activity.

SunTrust (NYSE:STI) is seeing 3X average trading volume, with 5`,000 contracts traded and put volume representing 57 percent of today's trading activity.

Royal Caribbean (NYSE:RCL) is seeing 12X normal trading volume. 46,000 contracts have traded, with puts representing half of today's volume.

Unusual volume (two times or more than normal average volume) is also being seen in CF, UAL (UAUA), and American Movile (NYSE:AMX).

Source: Monday Options Recap