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Sentiment

Stocks are trading mixed in very slow market action Friday. The table was set for early weakness after the Dow Jones Industrial Average rallied 274 points Thursday and after data showed retail sales unexpectedly falling 1.2 percent in May. What! Economists were looking for an increase of .1 percent. However, a better than expected reading from the UofM Sentiment Index (75.5 vs. 74.5 consensus) helped to offset some of the worry from the poor sales numbers and trading had turned mixed by midday. It’s been slow. With less than an hour left to trade, the Dow is down 25 points and the NASDAQ up 8. The CBOE Volatility Index (.VIX) lost .93 to 29.64. In the options market, about 3.8 million calls and 3.9 million puts traded so far, or only 60 percent the recent average daily volume.

Bullish Flow

After trading to a low of $56.90 in morning action, Concho Resources (NYSE:CXO) shares are up 39 cents to $58.49 and options volume is running 4X the recent average daily. The action includes 2127 Jul 65 calls and 2033 Dec 70 calls. Most of the action has been in smaller sizes on the ISE. The top trades are 200 lots trading at the ask in afternoon action. ISEE data hints at a non-customer firm buyer (however, it’s possibly premium selling and implied volatility is down about 5.5 percent to 51). Shares of the Midland, Texas onshore driller have been strong lately due to the recent problems in the offshore drilling industry. CXO is up nearly 25 percent from its late May lows and now testing a resistance area just above $59.

BP (NYSE:BP) shares are up $1.24 to $34.02 and implied volatility is easing for a second day on optimism the oil giant can “cope with the political and financial fallout from the massive oil spill in the Gulf of Mexico,” WSJ. 90K puts and 64K calls traded in the first two hours, or about 2X the recent average daily. The activity is scattered across a number of expiration months and strikes. About half is in the front month, June, which expire at the end of next week. The top trade is a seller of 12K Jan 20 puts at $2.15. Meanwhile, implied volatility is off 10 percent to 84.5, and now down about 28 percent from the record highs seen Wednesday.

Bearish Flow

Philip Morris (NYSE:PM) is down $1.04 to $44.07 and June puts are busy Friday. There doesn’t appear to be any company specific news on the cigarette maker, but some players seem to be bracing for additional weakness in the stock ahead of next week’s expiration. The Jun 40s traded 1555X (78 percent Ask) and the Jun 43s, 1300X (52 percent Ask). Implied volatility is up 3.5 percent to 29.

Implied Volatility Movers

Microsoft (NASDAQ:MSFT) is up 46 cents to $25.45 and the Oct 25 – 28 strangle is sold at $2.47, 20000X on CBOE. Volume exceeds open interest in the puts and so this is likely a new position in anticipation of rangebound action in the months ahead. Implied volatility in MSFT is down about 6 percent to 29.5 today, compared to a 52-week high and low of 38.5 and 19.5.

Unusual Volume Movers

Bristol Myers (NYSE:BMY) options volume is running 2X the usual, with 46,000 contracts traded and put activity representing about 53 percent of the activity.

Exco Resources (NYSE:XCO) options activity is running 9.5X the usual, with 20,000 contracts traded and put volume representing 98 percent of the volume.

American Movil (NYSE:AMX) options volume is running 3.5X the usual, with 18,000 traded and call volume representing 77 percent of the activity.

Unusual volume is also being seen in International Paper (NYSE:IP), General Mills (NYSE:GIS), and Heinz (NYSE:HNZ).

Source: Friday Options Recap