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Sentiment

The major averages are lower and trading is slowing ahead of the three-day weekend. After a bruising week, the Dow Jones Industrial Average traded lower Friday morning after the Labor Department reported that the US economy lost 125,000 jobs in June, which was 25,000 more than economists had expected. While the unemployment rate fell to 9.5 percent (vs. 9.8 consensus), average hourly earnings fell a worse-than-expected .1 percent. Adding to the worries, a report on Factory Orders that showed a drop of 1.4 percent in May, or more than double the -.6 percent expected by economists. After a four-day 411-point slide, the Dow is down another 65 points heading into the final hour. Trading volume is slowing, as players leave early to enjoy the three-day Fourth of July weekend. About 3.9 million puts and 4.0 million calls have traded across the eight options exchanges so far.

Bullish Flow

Biogen Idec (NASDAQ:BIIB) jumped $3.57 to $50.30 early Friday and rallied along with a number of other biotechs (AGN, GENZ, [AVNR]], ELN, CELG, SOMX) after Bloomberg reported that Sanofi-Aventis (NYSE:SNY) is preparing a major acquisition in the US, potentially worth $20 billion. BIIB options action is picking up as well, with July 55, Aug 55, and Aug 60 calls seeing interest in early trading. Implied volatility is up 6 percent to 36.

Gilead Sciences (NASDAQ:GILD) is up 64 cents to $34.68 amid strength in the biotech sector after Bloomberg reported that Sanofi Aventis is looking to make a major US acquisition (see today’s BIIB color). 12K calls traded in GILD, which is 3X normal for midday and 10X the number of puts. The action is scattered across July calls with strike prices ranging from 36 to 40. August 42 and 47s are seeing interest as well. According to WhatsTrading.com Flow Monitor, overall sentiment based on the total flow is 75 percent bullish. Implied volatility is up 3 percent to 37.

Bearish Flow

PMC Sierra (NASDAQ:PMCS), a Santa Clara, CA chipmaker, is off 15 cents to $7.36 and options volume is 32.5X the recent average daily, driven by apparent Nov 7.5 call writers. 13.4K traded. The top trade is 1795 on the 80 cent bid and was part of a sweep of 4900 contracts. Implied volatility is down about 4 percent to 44. No equity blocks traded. Earnings due July 22, after market.

Implied Volatility Mover

The day after bullish trading activity surfaced in Norfolk Southern (NYSE:NSC), options traders are showing interest in CSX (NYSE:CSX). 12K calls traded, which is 5X normal volume and compares to 1800 puts. Recent trades include lots of July 50 calls for between 95 and 97 cents. Implied volatility is up 4.6 percent to 46.5, as shares slip below a 200-day MA as well as previous support around $48.

Unusual Volume Movers

Motorola (MOT) options volume is running 10X the average daily, with 86,000 contracts traded and call volume representing 93 percent of the total volume.

Select Sector Basic Materials Fund (NYSEARCA:XLB) options volume is 5X the recent average levels, with 86,000 contracts traded and put volume accounting for 78 percent of the volume.

AMD options volume is 3X the average daily, with 75,000 traded and call volume representing 85 percent of the activity.

Unusual volume is also being seen in United Airlines (UAUA), Genzyme (GENZ), and Radioshack (NYSE:RSH).

Source: Friday Options Recap