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Sentiment

Major averages are lower in sluggish trading following a round of disappointing economic news Thursday. While JP Morgan (NYSE:JPM) delivered blowout earnings ($1.09 vs. 70 cents consensus) and data released early showed jobless claims falling by 29,000 last week, the rest of the day’s data painted a grim picture of economic activity. It included a surprise drop in the Philadelphia Fed Manufacturing Survey, which fell to 5.1 in July from 8 in June and well below expectations of 10.1. The Producer Price Index also fell, by .5 percent in June, and worse than the .1 percent that economists had expected. The rocket scientists had the NY Empire Manufacturing Index all wrong as well. It plummeted to 5.08 in July from 19.57 in June and much worse than the 18.0 consensus forecast. At the end of the day, the bearish manufacturing data trumped the earnings and weekly jobless claims. With about an hour left to trade, the Dow Jones Industrial Average is down 45 points and the Nasdaq has lost 9. The CBOE Volatility Index (.VIX) is up .49 to 25.38. Options action is picking up ahead of expiration Friday. About 6 million calls and 5.3 million puts traded so far.

Bullish Flow

Potash (NYSE:POT) calls are seeing some interest, as shares of the Ag/Chem names (MOS, IPI, CF, AGU, BG) stage an impressive rally off sessions lows. POT is up $2.95 to $96.80 and now 4.5 percent off its worse levels. Options players are showing interest in July 95 and 100 calls, with 4128 and 3246 traded, respectively. Implied volatility is down about 2.5 percent to 40. Earnings slated for July 29 (before market.)

Chesapeake (NYSE:CHK) is off 21 cents to $21.20 and the Oct 17.5 – 23 bullish risk reversal is seeing interest in recent trade. The top trade is 775 at 34 cents. 2600 total and possibly offsetting existing positions. Implied volatility is up 2.5 percent to 40. Earnings due 8/3 after market.

Bearish Flow

Qualcomm (NASDAQ:QCOM) is down 23 cents to $36.67 and 18,500 July 36 puts traded on the chipmaker so far. The top trade is a block of 4670 at 10 cents on ISE and an opening buyer, according to ISEE data. Indeed, with 93 percent trading at the ask and implied volatility up about 3.5 percent to 32, it looks like put buyers are initiating today’s bearish trades — which seems somewhat odd because the contract has less than two days of life remaining.

Implied Volatility Mover

Apple Computer (NASDAQ:AAPL) is down and its implied volatility higher, amid increasing activity ahead of the expiration and a news conference about iPhone 4 scheduled for Friday. Shares are down $3.00 to $249.72 and the July 250 puts and calls are the most actives. July 240 puts and 260 calls are the next most actives. Some closing activity is likely driving a good percentage of the volume ahead of the expiration. Others might be taking positions in anticipation of volatility in the share price when the company hosts a conference to discuss the iPhone at 10:00 a.m. Pacific Time tomorrow (according to theappleblog.com). Implied volatility is up 7 percent to 44.5.

Unusual Volume Movers

IShares Brazil Fund (NYSEARCA:EWZ) options volume is running 2X the norm, with 137,000 contracts traded and put volume accounting for 83 percent of the total activity.

AMD (NYSE:AMD) is seeing 2X the average daily options volume, with 79,000 contracts traded and call volume representing 43 percent of the flow.

CIT (NYSE:CIT) options volume is 10X the recent average daily, with 46,000 contracts traded and call volume representing 79 percent of the activity.

Unusual volume is also being seen in Boeing (NYSE:BA), Motorola (MOT), and Etrade Financial (NASDAQ:ETFC).

Source: Thursday Options Recap