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Sentiment

The stock market averages seemed to find some support from better-than-expected economic news and strength in the commodities markets Monday. Economic data was in focus early after a report released one hour before the start of trading in New York showed personal incomes increasing .4 percent and spending up .2 percent in December. Economists were looking for gains of .3 percent in both incomes and spending. Ninety minutes later, the ISM Index, a gauge of activity in the manufacturing sector, showed a surprise increase to 58.4 in January, which was up from 54.9 and also better than the 55.5 reading economists had predicted.

Exxon Mobil (NYSE:XOM) helped lift the Dow Jones Industrial Average as well. Shares moved up after the oil giant reported earnings that beat Street estimates (see bullish flow below) and after crude oil rallied $1.70 to $74.59 a barrel. Gold rallied $21.90 to $1105.70 an ounce.

The Dow Jones Industrial Average is up 100 points heading into the final hour of trading. The NASDAQ gained 19. The CBOE Volatility Index (.VIX) slipped 1.70 to 22.92. Options volume is on the light side, with approximately 4.4 million puts and 5.5 million calls traded (a ratio of .81, compared to a 22-day average of .76.)

Bullish Flow

Exxon Mobil (XOM) is up 2.8 percent to $66.85 and one of the best gainers in the Dow Jones Industrial Average after the oil giant posted earnings of $1.27 per share, which topped analyst estimates by 8 cents. In the options market, a noteworthy trade is the Jan11 65 - 75 call spread, traded 14500X at $3.80. Recall that we saw the same spread trade at $3.40, 14500X Friday, and today's action might add to that position on the heels of the better-than-expected results.

Steel Dynamics (NASDAQ:STLD) is seeing relative strength and increasing options action ahead of a February 3 (after market) earnings release. Shares of the steelmaker are up 4.8 percent to $15.90 and among the best gainers in the NASDAQ 100 late Monday. In the options, 9820 calls and 710 puts traded. One of the top trades of the day is a block of 1196 Feb 17 calls at 35 cents on ISE. It was part of a multi-exchange sweep of 2979 contracts and an opening customer buyer, according to ISEE data. A block of 2680 Feb 17 calls at the asking price of 40 cents on PHLX also looks like an opening buyer. 7000 contracts now traded. Implied volatility (average) is moving up to 55.8 percent, from about 56.4 late Friday.

Bearish Flow

Moody's (NYSE:MCO) lost 73 cents to $27.59 Friday and put volume totaled 5,900 contracts, which was about 10X the number of calls. The top trade was 4350 Jan11 17.5 puts at the asking price of $1 per contract. It was an opening trade, as open interest increased by 4,544 to 22,689 and now the largest of any MCO options contract. There has been several days of put activity in recent days and the interest in Jan11 17.5 puts is possibly some investors hedging their bets in Moody's for the remainder of 2010. With shares near $28, the contract is 37.5 percent out-of-the-money. It would take a substantial price decline for these puts to pay-off.

Implied Volatility Movers

Amylin Pharmaceuticals (AMLN) is down 39 cents to $17.59 and recent trades include a buyer of 5000 Mar 22.5 calls at 45 cents each. More than 8,000 now traded. Implied volatility is up about 8 pecent, to 75 percent.

Unusual Volume Movers

Intermune (NASDAQ:ITMN) is seeing 15X average daily trading volume, with 57,000 contracts traded and call volume representing about 70 percent of today's activity.

Amazon.com (NASDAQ:AMZN) is seeing 2X average trading volume, with 237,000 contracts traded and puts representing 53 percent of today's trading activity.

Aetna (NYSE:AET) is seeing 3X normal trading volume. 54,000 contracts traded, with put options representing about 81 percent of today's volume.

Unusual volume (two times or more than normal average volume) is also being seen in Humana (NYSE:HUM), HP (NYSE:HPQ), and Talbots (NYSE:TLB).

Source: Monday Options Recap