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Sentiment

Stocks are broadly higher following strong gains in Europe and upbeat domestic economic news Monday. Stock index futures rose overnight along with European benchmarks after HSBC (HBC) and BNP Paribas posted strong earnings. Then, attention turned to the ISM Manufacturing Index for July at 10:00 a.m. eastern time. The report showed a drop to 55.5 in July, down from 56.2 in June, but better than the 54.2 reading that economists had expected. Separate data showed June construction spending up .1 percent in June; which isn’t great, but better than the .8 percent decline that economists had forecast. Meanwhile, commodity-related names remain strong after crude oil rallied $2.50 to $81.45 a barrel. Exxon Mobil (XOM) is among the best gainers in the Dow Jones Industrial Average, which is up 210 points heading into the final hour. The NASDAQ added 42. The CBOE Volatility Index (.VIX) is off 1.66 to 21.84 amid light volume in the options market, with 5.7 million calls and 4.5 million puts traded so far.

Bullish Flow

Action continues in SPDR Homebuilders ETF (XHB). The focus now is on the Aug 15 – 16 call spread. The 15s have traded 24363X and the 16s, a total of 31,499. The top trade is a spread, apparently sold at 48 cents, 8372X on ISE. ISEE data indicate that half are opening customer buyers and this likely rolls a position opened on July 19 when more than 40K Aug 15 calls traded. If so, the strategist is collecting a hefty 40-cent per contract profit (roughly) on the 15s and now opening a similar position in the 16s at 24 cents each. It’s a short-term play because August options expire in 18 days.

Ford (F) options top the single-stock list today, as a customer sold the the Sept 12-13 call spread 150,000x for 65cents on the PHLX just after 11am ET when shares were near $13.10. Seller collects a total of $9.75million, before commissions, and the trade may close part of a large position entered on July 9th when a customer bought 150,000 Sep 12s and sold 75K each of the sep 14 and 15 calls in an opening trade. If so, the trader has recouped most of their premium and is left long the 13-14 call spread and 13-15 call spread into the fall.

Bearish Flow

Mosaic (MOS) is up $1.45 to $49.10 and trading is active, with 18K calls and 16K puts traded so far. The top trade is a Sep 41 – 45 (2X1) put ratio spread, apparently bought at 32 cents, 2300X on AMEX. Beyond that, most of the action has been in smaller lots and seems to reflect mixed sentiment towards the Plymouth, MN ag chemical company. Implied volatility is down about 2 percent to 40 ahead of a conference call today at 4:30 pm ET. It’s related to a ruling Friday issuing a temporary injunction on a planned extension on its South Fort Meade facility. Goldman said this morning the ruling is clear negative, but appears manageable.

Implied Volatility Mover

Bearish activity detected in Omnicare (OCR), with 4058 puts trading, or 22x the recent avg daily put volume in the name. Shares are down $1.83 to $22.80 on news the company’s CEO has unexpectedly resigned. Aug and Sep 22.5 puts are the most actives. Implied volatility surged nearly 40 percent to 53.

Unusual Volume Movers

Bullish flow detected in Parker Hannifin (PH), with 2055 calls trading, or 6x the recent avg daily call volume in the name.

Bullish flow detected in General Cable (BGC), with 2058 calls trading, or 11x the recent avg daily call volume in the name.

Bearish activity detected in Atlas Energy (ATLS), with 2067 puts trading, or 8x the recent avg daily put volume in the name.

Increasing volume is also being seen in Xerox (XRX), Genworth (GNW), and Brocade (BRCD).

Source: Monday Options Recap