Sentiment
Stocks are broadly higher late Wednesday, with help from upbeat economic and earnings news. Intel (INTC) is up 3 percent and helping the Dow Jones Industrial Average and the NASDAQ after chipmaker posted better than expected results for the first quarter and raised guidance for the second. JP Morgan Chase (JPM) and CSX are also higher on earnings.
In economic news, a report released Wednesday morning showed retail sales up 1.6 percent last month, which was better than the 1.2 percent increase economists had expected. Excluding autos, sales rose .6 percent. Separate data showed the Consumer Price Index [CPI] up .1 percent in March, which was in-line with expectations. The data helped set a positive tone at the open and the major averages saw an additional lift late in the day after the Fed's latest Beige Book noted signs of modest improvement in economic conditions.
Heading into the final hour, the Dow Jones Industrial Average is up 90 points and the NASDAQ has added 32.5. The CBOE Volatility Index (.VIX) fell. 44 to 15.76. Trading in the options market is very active, with 12.1 million calls and 6.2 million puts traded so far.
Bullish Flow
IBM (IBM) is up $2.15 to $131.18 and 69K call options have traded on the computer maker, with some optimistic investors likely taking positions on hopes IBM can follow Intel's lead and post strong first quarter earnings on April 19. Today's trades include a block of 25K Jan 150 calls at the 25-cent asking price and appears to be an opening purchase in anticipation of additional gains in IBM shares during the rest of 2010. 28K contracts traded. Meanwhile, April 130 puts and calls are also among the most actives, with short-term players jockeying for position ahead of the earnings results. Implied volatility is flat at 19.5.
The top options trades so far today are in Barrick Gold (ABX). The action includes a block of 51.9K Jan 30 calls at $11.80 and another block of 37.4K Apr 30s traded at $10.65. Looks like a roll of a position, out of the April 30s and into the Jan 30s. In the April contract, 51.7K now traded vs. 54.2K in open interest. The Jan 30s have traded more than 70000X vs. 1236 in open interest. So, it looks like a new position in the Jans and one that will create the most open interest in the largest gold miner by market cap. The April 30 calls currently have the most open interest, but that will change if today's action is indeed closing. ABX is up 46 cents to $40.89 and this roll of deep-in-the-money calls appears to be the extension of a bullish trade, for an additional 8 months.
Bearish Flow
Yahoo (YHOO) is down 8 cents to $18.10 and a July 17 -19 call spread was sold this morning, 20000X at $1.01. It appears that the July 19 calls were later canceled, leaving 20000X July 17 calls sold at $1.79. Separately, one player bought 12K July 15 puts at 20 cents on AMEX. A total of 20K now traded. The overall action might be one strategist at work in the July 15 -17 bearish risk-reversal ahead of Yahoo's April 20 earnings release. Or, one or both legs might be closing trades because open interest is sufficient to cover in both contracts.
Implied Volatility
Rambus (RMBS) saw a spike, on increasing volume, to $23.48 and was recently up $1.19 to $23 on speculation of a licensing agreement with Apple Computer (AAPL). Briefing says the talk “seems unlikely." Nevertheless, shares are up and 22K calls traded on Rambus so far. April and May 23 and 24 calls are the most actives, as some traders take positions on hopes for additional short-term gains. Implied volatility in Rambus jumped 19 percent to 49.
Unusual Volume Movers
Intel (INTC) options volume is running 3X the usual, with 105,000 contracts traded and call activity representing about 71 percent of the activity.
Citigroup (C) options activity is running 2X the usual, with 2.07 mln contracts traded and call volume representing 85 percent of the volume.
BofA (BAC) options volume is running 2X the usual, with 687,000 traded and call volume representing 70 percent of the activity.
Unusual volume is also being seen in Microsoft (MSFT), JP Morgan (JPM), and Ambac (ABK).
