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Sentiment

The major averages are sporting modest gains despite horrible housing data Wednesday. After a 101-point drop Tuesday, the Dow Jones Industrial Average opened higher and held steady through a New Home Sales report that showed a drop to record lows of 309,000 (annual rate) in January. Economists were expecting to see improvement to an annual rate of 354,000 homes, up from 342,000 the month before.

Then, Bernanke was in the hot seat in front of House Financial Services Committee. The head of the Federal Reserve didn't color outside the lines and, instead, said interest rates would stay low as long as necessary to revive the ailing economy. That seemed to ease some of the concerns that surfaced when the Fed unexpectedly raised the discount rate last week.

So, the Dow Jones Industrial Average marched higher and, with forty-five minutes left to trade, is up 75 points. The NASDAQ added 17. Volume and volatility are easing. The CBOE Volatility Index (.VIX) is down .75 to 20.62. Approximately 5.8 million calls and 4.6 million puts traded so far.

Bullish Flow

JP Morgan (NYSE:JPM) is up 2.1 percent to $40.72 and the best gainer in the Dow Jones Industrial Average ahead of its Investor Day tomorrow. Options action is picking up as well: 49,000 calls and 40,000 puts traded so far. Recent trades include a June 30 - 40 put spread, apparently bought at $2.15, 2500X on AMEX and tied to 88K shares at $40.70. Jan11 $35 calls are the most active. The 20.1K contracts includes a block of 8200 at the asking price of $8.40 on PHLX; might close. Open interest is 38.6K.

Bearish Flow

Altera (NASDAQ:ALTR) touched a new 52-week high and is up $1.05 to $24.29 after Stifel analysts resumed the stock with a Buy rating and a $30 price target. In the options market, trading seems defensive, however, with 18K puts and 910 calls traded. April 24 puts are the most actives. 13.7K traded (20% Mid / 79% Ask) and implied volatility is up about 1.5 percent to 28.5. Open interest is only 30 contracts. So, some put buyers might be opening positions ahead of the chip equipment maker's presentation at a Goldman Sachs tech conference (2:40 ET).

Implied Volatility Movers

Millipore (NYSE:MIL) shares launched 22.5 percent higher Monday after Bloomberg reported Thermo Fisher (NYSE:TMO) might make a bid for the company. MIL has added another 6.4 percent over the past two days. Today, with shares up $4.10 to $92.97, another 35K calls and 5,340 puts traded. March 90, 95, and 100 calls are the most active, as some speculators take positions amid hope for an announcement before the March expiration (23 days). Others might be closing positions after Bloomberg reported that GE said it's unlikely to buy MIL because the deal would be too big — perhaps diminishing hopes for an eventual bidding war. Meanwhile, implied volatility is easing after the dramatic spike Monday, down 10 percent to about 36 today.

Unusual Volume Movers

Ford Motor (NYSE:F) is seeing 2X average daily trading volume, with 223,000 contracts traded and put volume representing about 75 percent of today's activity.

Brocade (NASDAQ:BRCD) is seeing 11X average trading volume, with 126,000 contracts traded and calls representing 71 percent of today's trading activity.

ArcelorMittal (NYSE:MT) is seeing 6X normal trading volume. 59,000 contracts traded, with call options representing about 87 percent of today's volume.

Unusual volume (two times or more than normal average volume) is also being seen in STEC, Target (NYSE:TGT), and the Select Sector Technology Fund (NYSEARCA:XLK).

Source: Wednesday Options Recap