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Sentiment

Market action is mixed on a slow news day Monday. With an empty economic calendar and no earnings of broad market significance, the focus was on the day’s other stock news. BofA (NYSE:BAC) is helping the Dow after Fitch upgraded the bank’s preferred stock credit rating. Meanwhile, merger activity is in focus after HP topped Dell’s bid for 3Par and Potash (NYSE:POT) CEO said his company has received “exceptional interest” from a number of different bidders. Outside of that, there hasn’t been much to guide market action.

The Dow Jones Industrial Average now up 27 points and roughly midway within today’s 114-point trading range. The CBOE Volatility Index (.VIX), which slipped .75 last week, is off another .86 to 24.63 and near session lows. Volume is on the light side. 4.8 million calls and 4 million puts traded so far, or about 94 percent of the recent average daily volume

Bullish Flow

Add Safeway (NYSE:SWY) to today’s list of September put sellers. Shares are flat at $20.01 and a block of 19K Sep 19 puts traded on the 15-cent bid. Another 15.7K block also traded on the 15-cent bid. Open interest is 22.4K. Like the others, the focus is on September out-of-the-money puts, where the investor is collecting relatively small premium 25 days ahead of the expiration. Most of the companies are also names with stable earnings and low volatility. SWY implied volatility is flat today at 28.5, compared to a 52-week high and low of 39.5 and 20.2.

GE (NYSE:GE) is off 12 cents to $14.91 and one strategist pays 37 cents for Oct 16 calls, 10000X to open a new position. The premium purchase was tied to shares at $15.20 (on a 32 delta). Implied volatiity in GE is flat at 33, compared to a 52-week high and low of 55 and 23.

Bearish Flow

Anadarko Pete (NYSE:APC) loses 72 cents to $47.98 and a noteworthy spread in the driller midday Monday is a Nov 50 - 55 put sprad, sold at $3.08, 4000X on PHLX. It was tied to 64K shares at $48.25 and, looking at the open interest, might roll down in strikes, from 55s to 50s. Shares are down nearly 14 percent in the past two weeks and this strategist might be banking the profit of the 55s, but buying 50s in anticipation of additional downside.

Implied Volatility Mover

iPath S&P 500 VIX Short-Term Futures ETF (NYSEARCA:VXX) loses 40 cents to $22.44 on a day of quiet trading Monday. Noteworthy blocks Sep 20 puts traded on the exchange-traded fund after 44K were sold at an average of 27.5 cents and 20K sold at 32.5 cents. 64.9K now traded vs. 17.9K in open interest. Looks like these investors expect volatility to hold around these levels or possibly move higher, and or they are willing buyers of VXX at $20 per share.

Source: Monday Options Recap