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Sentiment

Not even disappointing monthly jobs numbers could stir up volatility. After a dip at the open, trading turned mixed and the CBOE Volatility Index (.VIX) is falling to its lowest levels since June 2008. The table was set for early weakness after the Labor Department said that the US economy lost 85,000 jobs during the month of December, which was much worse than the average economist estimate of 0.

The other details of the report weren't so bad. November numbers were revised up to show a 4,000 increase in new jobs, compared to an initial reading of -11,000. The unemployment rate held steady at 10 percent. Some economists were looking for an increase to 10.2 percent. Average hourly earnings rose .2 percent, which was in-line with expectations.

In the end, the poor headline number triggered only a modest negative reaction and, by midday, trading had turned decidedly mixed. The Dow Jones Industrial Average is down 30 points, but the NASDAQ added 11. The CBOE Volatility Index (.VIX) is .69 to 18.37 and poised to close at its lowest levels since mid-2008. Trading in the options market is active, with about 4.7 million puts and 7 million calls traded so far (a ratio of .68, compared to a 22-day average of .64.)

Bullish Flow

Dryships (DRYS) shares have been grinding higher today, recently up 30 cents to $6.77 amid relative strength in the dry bulk shippers Friday -- Ship Finance Intl. (SFL), Teekay (TK), Tsakos (TNP), Genco (GNK), Diana (DSX). In the options market, volume has been impressive, with 56K calls and 6,500 puts traded. While action is scattered across a number of different contracts (Jun 7, Jan 6, Mar 7, Jan 7.5, Jan11 10s), Feb 7 calls are the most actives. 15.9K traded and, with about two thirds trading at the ask, it looks like buyers are dominating the action. No news today. DRYS saw a pop Tuesday on chatter about new contracts with two larger drillships — still unconfirmed.

Manitowac (MTW), the Manitowac, Mich. farm and construction machinery company, is rallying to session highs, up 57 cents to $13.10. Shares have rallied every day this week and up 31.9 percent since last Friday. Now options action is picking up as well. Volume is running 2X the average daily, with 7,925 calls and 665 puts traded. The action is scattered across Jan and Feb calls at the 12.5, 13, and 14 strikes. Some players are likely closing out positions in the front month after the big move. Others appear to be opening new positions in the Feb 14s in anticipation of additional upside. No news on the stock.

Bearish Flow

Select Sector Technology (XLK) is up 3 cents to $22.92 and an investor collects 15 cents on Jan 23 calls, 24000X, according to an exchange-floor contact. More than 50K traded vs. 84K in open interest. So this might be closing trades ahead of next week's expiration. That is, since only 5 and a half trading days remain until these options expire, and the contract is currently 8 cents out-of-the-money (23 - 22.92), these premium sellers are likely liquidating positions to salvage the 15 cents of time value that still remains.

Implied Volatility Movers

Autodesk (ADSK) is up 57 cents to $26.05 and one of the best gainers in the NASDAQ 100 Friday. In the options market, some premium sellers are bid whacking in the April and July puts with strike prices ranging from 24 to 28. For example, in the April 27 puts, today's most actives, 2300 traded and 99 percent hit on the BID. 18K puts now traded, compared to 3600 calls, and only 18 percent of the puts traded at the ask. Implied volatility (average) is dipping below 23, from 24.7 late yesterday. The company said today that Jay Bhatt, senior vice president, will be speaking at the Needham Growth Conference on January 12, 2010 in New York.

Unusual Volume Movers

US Steel (X) is seeing 4X average daily trading volume, with 169,000 contracts traded and call volume representing 55 percent of today's activity.

Motorola (MOT) is seeing 6X average trading volume, with 152,000 contracts traded and calls representing 92 percent of today's trading activity.

Qualcomm (QCOM) is seeing 3X normal trading volume. 136,000 contracts have traded, with call options representing about 71 percent of today's volume.

Unusual volume (two times or more than normal average volume) is also being seen in Alcoa (AA), Weatherford (WFT), and Dryships (DRYS).

Source: Friday Options Recap