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Sentiment

The major averages battled back from early losses and are trading mixed late Monday. The table was set for early losses after markets fell across Asia and Europe amid ongoing concerns about the implications of the SEC fraud charges against Goldman Sachs. Those worries seemed to overshadow better-than-expected earnings from Citi (NYSE:C) as well as a 1.6 percent increase in the List of Leading Indicators in March.

However, after sluggish action in the first half of trading, the tone improved and, with an hour left to trade, the Dow Jones Industrial Average is up 55 points. The tech-heavy NASDAQ is down 7 points ahead of earnings from IBM due out after the closing bell. The CBOE Volatility Index (.VIX) hit a morning high of 19.55, but was recently down .19 to 18.17. Trading in the options market remains active, with about 7.7 million puts and 8.7 million calls traded.

Bullish Flow

Sequenom (NASDAQ:SQNM) shares hit a high of $6.46 and were recently up 36 cents to $6.16 after the company introduced MassArray Analyzer 4, a next generation mass spectrometry system. Cantor analysts note that the biotech is now uniquely positioned to engage in partnerships following the launch and maintains a Buy rating on SQNM. In the options market, today's volume includes about 15K calls and 1,200 puts traded so far. Some short-term speculators are looking for additional upside in May 6, 7 and 8 calls. A combined 10,525 contracts traded and about 45 percent trading at the asking price. June 6 calls seeing interest as well. Implied volatility is flat at 88.

Merck (NYSE:MRK) is off 7 cents to $35.63 and a noteworthy trade this morning is a buyer of 8,000 Jan 40 calls at $1.25 on AMEX. It was tied to shares at $35.50, according to a source on the exchange-floor. It might close an existing position, as open interest is 33K and the third largest position in MRK options (behind the Jan 35 puts and Jan 45 calls.)

Bearish Flow

Palm (PALM) is down 43 cents to $5.16 early Monday after announcing a series of executive and management changes. UBS analysts speculate that the timing of the departure and retention announcements are a sign that an acquisition is not pending. Meanwhile, Morgan Keagan analysts downgraded the stock to Underperform on the news. In the options market, the early focus is on PALM May 4 puts, with 3900 traded (77% Ask) and implied volatility up about 4 percent to 105.

Implied Volatility Movers

SuperValu (NYSE:SVU) is up 18 cents to $17.16 and May 17.5 calls are busy for a second day ahead of earnings. Friday, after UBS added SVU to its Short-Term Buy list, a block of 3000 contracts traded at the 35-cent asking price, which opened a new position. Another 4189 trade today (38% Bid / 62% Ask). The top trade is 1500 on the 60-cent bid, which might close out half of the position opened Friday at a 25-cent profit. Beyond that, the next largest trade is a lot of 315 contracts at the 65-cent asking price and it looks like premium buyers are dominating most of the flow, possibly looking for good earnings to lift shares Tuesday morning. Implied volatility is up about 5 percent to 36 ahead of the news.

Unusual Volume Movers

Citi (C) options volume is running 2X the usual, with 2.4 million contracts traded and call activity representing about 73 percent of the activity.

Goldman Sachs (NYSE:GS) options activity is running 3X the usual, with 407,000 contracts traded and call volume representing 58 percent of the volume.

IBM (NYSE:IBM) options volume is running 2X the usual, with 78,000 traded and call volume representing 61 percent of the activity.

Unusual volume is also being seen in Johnson & Johnson (NYSE:JNJ), Corning (NYSE:GLW), and Weatherford (NYSE:WFT).

Source: Monday Options Recap