Friday Options Recap

by: Frederic Ruffy


Stocks rallied around surprising jobs numbers early Friday, but the rally ran out of gas midday and the major averages are holding only modest gains late in the trading session.

The Dow Jones Industrial Average rose 150 points early after the Labor Department reported that the US economy lost just 11,000 jobs in November. The headline number was significantly better than the 120,000 loss economists were expecting. October numbers were revised to show a loss of 111,000 jobs, compared to an initial reading of -190,000. In addition, the unemployment rate fell to 10 percent, from 10.2 percent. Economists were looking for an increase to 10.3 percent.

Overall, the news was good, but it also triggered a volatile reaction in other markets. Bonds were sold and the yield on the benchmark ten-year Treasury rallied to 3.48 percent from about 3.37 percent late Thursday. The buck rallied and the euro fell back to 1.49, which triggered heavy selling in the gold market. The yellow metal is off more than $65.

The major averages also slipped and a 6.8 percent loss in Du Pont (NYSE:DD) is weighing down the Dow. With 40 minutes left to trade, the industrial average is up 20 points, but 130 off its best levels of the session. The tech-heavy NASDAQ added18.4. The CBOE Volatility Index (.VIX) lost .46 to 22 now that some "event risk" has passed. Trading in the options market is active, with approximately 6.1 million puts and 7.5 million calls traded so far (a ratio of .82 compared to a 22-day average of .77.)

Bullish Flow

Monster Worldwide (NYSE:MWW) is up $1.66 to $16.69 amid strength in the staffing stocks (RHI, MAN, SFN, KELYA, TBI) Friday after data released before the bell showed the US economy losing 11K jobs (vs. 120K consensus) in November and the unemployment rate falling to 10 percent from 10.2 percent (vs. 10.2 percent consensus). The thought that companies might be hiring again has stoked interest in MWW and other staffing companies. MWW options volume is running 2X the average daily, driven by buyers of Jan10 20, Dec 17.5 and June 17.5 call options. 12K calls traded total, compared to 1,290 puts.

Bearish Flow

PowerShares QQQ (QQQQ) Dec 44 put is today's most actively traded contract. After touching a new 52-week high of $44.73, shares have given up early gains, now down 7 cents to $43.82. 88,560 Dec 44 puts traded, with some players paying 48 cents in morning trading, and also buying Dec 43 puts at 24 cents. Nice timing because the 44s are now bid at 88 cents and the 43s have almost doubled. Implied volatility in the Qs, as reflected in the QQV index, is up to 21.39 and well off session lows of 19.27.

Implied Volatility Movers

Barrick Gold (NYSE:ABX) is down $4 to $42.84 and implied volatility is higher after gold came under pressure Friday. The yellow metal fell $61.10 to $1157.20 an ounce. In ABX, the largest gold miner, options volume hit 3X the average daily, with 67,000 calls and 64,000 puts traded so far. Implied volatility is rallying, up to 53.7, from about 49 yesterday and 41 a week ago.

Unusual Volume Movers

BofA (NYSE:BAC) is seeing 2X average daily trading volume, with 794,000 contracts traded and call volume representing 61 percent of today's activity.

SPDR Gold Fund (NYSEARCA:GLD) is seeing 2X average trading volume, with 679,000 contracts traded and call volume representing 64 percent of today's trading activity.

Bristol Myers (NYSE:BMY) is seeing 2X normal trading volume. 168,000 contracts have traded, with put representing 52 percent of today's volume.

Unusual volume (two times or more than normal average volume) is also being seen in Newmont Mining (NYSE:NEM), Goldcorp (NYSE:GG), and Sun Micro (JAVA).