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Sentiment

Stocks are holding modest gains following several days of high volatility. The table was set for morning losses on Wall Street, as major averages were once again under pressure throughout much of Asia and across Europe. However, European benchmarks battled back and finished mixed. Meanwhile, financials, which had faltered in morning trading after the Senate passed its Financial Reform bill, led the Dow Jones Industrial Average back into positive territory. JP Morgan (JPM), BofA (BAC), and American Express (AXP) are the best gainers in the Dow. The industrial average, which lost 376 points yesterday, is up 35 heading into the final hour. The options expiration is likely adding to the volume and volatility today. About 9.6 million calls and 12.2 million puts traded so far.

Bullish Flow

Salesforce.com (CRM) is up $3.19 to $82.22 and options volume is 10.5X the recent average daily. Shares experienced volatility early after the company reported earnings and issued a full year outlook that fell short of some expectations. However, Wedbush analsyts said CRM should be bought on any weakness and some investors seem to agree. Shares are up 11.2 percent from session lows. In the options market, the bulk of the activity is due to an Aug 85 – 100 call ratio spread, sold at $2.45, 13000X on CBOE. It likely exits a position opened at $2.90 on April 12.

Lifetime Fitness (LTM) adds $1 to $34.80 and options volume is 16X the average daily, led by a Jun 30 – 40 bullish risk reversal, at even, 2770X on NYSE. Looks like a new position. Shares saw a two-day rally to $40 after the company reported earnings on 4/22. However, a six-day slide prior to today sent shares back to $33.80.

Bearish Flow

Select Sector Industrial Fund (XLI) has seen a day of brisk trading, with 123K contracts on the tape so far. Shares are up 21 cents to $29.22 and the top trades look like a roll of 21500 in-the-money Jun 30 puts at $1.56 to 27000 out-of-the-money Jun 28 puts at 85 cents. This strategist might be exiting a position after the recent 12 percent slide in XLI shares, then opening a similar bearish play in the lower strike puts. Action is also being seen in the June 26 – 29 put spread at 86 cents, 3000X. A separate trade includes an apparent buyer of 10K Jun 31 calls at 43 cents each (tied). September options are also seeing action, including apparent strangle buyers in the 30 – 32 strikes, 7000X. Finally, Sep 28 puts have traded 15000X, including a block of 4900 at $1.50 (vs. 41.9K in open interest.)

Implied Volatility Movers

Celldex Therapeutics (CLDX) is down 57 cents to $7.11, as some investors seem disappointed with the biotech’s four abstracts on data that will be presented at ASCO in June. However, while shares are down, options volume is 4X the average daily, with 9225 calls and 570 puts traded. The top trade is a block of 1000 August 7.5 calls at $1 on ISE, which might be a seller offsetting a position. However, a total of 2625 calls have been bought-to-open so far on the ISE, as some investors might be taking positions in the June 7.5 and 10 calls ahead of the ASCO presentations (June 4 -5). Others are probably closing some positions opened yesterday. 8645 calls traded in the name Thursday. Implied volatility rose to 178, from 166, and is back to 165 Friday morning.

Unusual Volume Movers

IShares Brazil Fund (EWZ) options volume is running 2X the usual, with 212,000 contracts traded and put activity representing about 66 percent of the activity.

Google (GOOG) options activity is running 3X the usual, with 172,000 contracts traded and call action representing 57 percent of the volume.

Select Sector Energy Fund (XLE) options volume is running 2X the usual, with 110,000 traded and put volume representing 79 percent of the activity.
Unusual volume is also being seen in Dell (DELL), UPS (UPS), and European Style S&P 100 (.XEO).

Source: Friday Options Recap