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Sentiment

The major averages traded lower in morning action on disappointing weekly jobless claims numbers and weakness in overseas markets, but are back in the green late Thursday. The stage was set for early losses after the Labor Department reported that weekly jobless claims rose by 18,000 to 460,000 in the period ended April 3. Economists were expecting to see claims fall by about 7,000. Meanwhile, Europe's equity markets were under water amid ongoing concerns about debt problems and rising bond yields in Greece.

However, the major averages were flat into midday and saw a modest rally late. With less than an hour remaining to trade, the Dow Jones Industrial Average is up 45 points and almost 100 from its worst levels. The CBOE Volatility Index (.VIX) lost .21 to 16.41. Trading in the options market is running about the typical pace, with 6.6 million calls and 4.8 million puts traded so far.

Bullish Flow

Morgan Stanley (NYSE:MS) is up 80 cents to $30.82 and not far from session highs (30.88). Options action is picking up as well, with 59,000 calls and 21,000 puts traded so far. The top trade is a block of 10K April 31 calls at 20 cents on CBOE, which was initiated by a buyer, according to a source on the floor. 30K now traded, including a morning sweep of 5670 at 14 cents and also a buyer, according to ISEE. Meanwhile, about 12.9K April 30 calls traded. A couple of sweeps hit on the bid, or 82 and 85 cents, and might be liquidating trades. As of yesterday, open interest in April 30s, which are 82 cents ITM, was 32K. Implied volatility in MS is flat today near 32.

For the second time in three days, Eastman Kodak (EK) has seen an impressive rally along with heavy call volume. Some attributed Monday's 13.2 percent rally to a short squeeze and or a positive newsletter mention. Today, shares are up 91 cents to $7.52 on no news, with volume picking up noticeably in the past 20 minutes. In the options market, flow remains bullish as well. 27753 calls trading, or 4x the recent avg daily call volume. Oct 7, May 8, and Apr 7 calls buyers leading the flow. Implied volatility up about 9 percent to 73.

Bearish Flow

A number of specialized semiconductor companies are seeing bearish activity Thursday. Novellus (NASDAQ:NVLS) lost 44 cents to $25 and 2681 May 25 puts traded (96% Ask). Teradyne (NYSE:TER) is down 36 cents to $11.26 and 2000 May 12.5 puts traded (100% Ask). KLA Tencor (NASDAQ:KLAC) lost 57 cents to $31.12 and 5500 April 31 puts traded (75% Mid/25% Ask). Cirrus Logic (NASDAQ:CRUS) lost a penny to $9.65 and today's action included a buyer of 3000 April 10 puts at 57.5 cents per contract. It's not clear what's driving the activity, but seems to be a play on sector trends and possible weakness in the short-term.

Implied Volatility Movers

CKE Restaurants (CKR) gains another 20 cents to $12.01 and calls are busy today on reports Apollo Management is an alternative bidder for the company, which would compete with an existing bid from Thomas H Lee Partners. 4260 calls and 260 puts traded so far. While May 12.5 calls are the most actives, April, June and Sep 12.5 call options are seeing interest as well. Implied volatility (May 12.5s) is up about 16 percent, as the options market seems to be pricing in the possibility of some additional bidding in CKR.

Unusual Volume Movers

MGM (NYSE:MGM) options volume is running 5X the usual, with 198,000 contracts traded and call activity representing about 64 percent of the activity.

El Paso (EP) options activity is running 52X the usual, with 180,000 contracts traded and call volume representing 99 percent of the volume.

Amazon.com (NASDAQ:AMZN) options volume is running 2X the usual, with 149,000 traded and call volume representing 65 percent of the activity.

Unusual volume is also being seen in Nokia (NYSE:NOK), AMR (AMR), and Target (NYSE:TGT).

Source: Thursday Options Recap