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Sentiment

Stocks fell on disappointing jobs numbers, but battled back through midday and market action is mixed late-Friday. The tone of trading turned cautious early after the Labor Department reported that the US economy added 39,000 jobs last month. Economists were looking for an increase of 130,000. Meanwhile, the unemployment rate, which was expected to hold at 9.6 percent, increased to 9.8 percent. However, with help from rallying commodities prices and falling spreads on some key Euro-zone debt, the market had steadied by midday. In fact, it’s been a rather quiet trading session. The Dow Jones Industrial Average has traded in a 39-point trading range and is off 13 points. The NASDAQ added 6.4. Overall options volume is slowing heading into the weekend, 6.6 million calls and 4.6 million puts traded so far.

Bullish Flow

Walter Energy (NYSE:WLT) has been grinding higher and is up $3.52 to $109.12, near its best levels of the day. Options are actively traded as well, with 25000 calls and 8,075 puts traded in the name. Dec 120 calls are the most actives. 6,960 traded (76 percent bid). Dec 110 and 115s are busy as well. Implied volatility is down about 14 percent to 44. WLT saw a flurry of activity on 11/18 and 11/19 on news it was buying Canadian peer Western Coal and some players might be liquidating positions today on reports the deal has been sealed — Reuters.

Dryships (NASDAQ:DRYS) shares are up 60 cents to $5.83 and options action is heating up after the Greek dry bulk shipper announced plans to sell shares of its Ocean Rig drilling unit to raise $500 million. The funds will be used to finance new drillships and the move will reduce its stake by about one-fifth. Shares gapped higher on the news and 61,000 calls have traded in DRYS, or 6X the normal and 6X the day’s put volume. Dec 5.5, Dec 6, Jan 5.5 and Jan 6 calls are seeing the most interest. Implied volatility is up about 7 percent to 54.5.

Bearish Flow

The top options trade so far today is in the Financial Select Sector Fund (NYSEARCA:XLF) after one strategist sold 150,000 Dec 15 calls at 28 cents per contract. It’s likely a closing trade. Open interest is 453K and currently the largest position in the ETF. Another interesting trade in XLF options today is a Jan 14 – 15 – 16 call butterffly at 31 cents, 19500X. This might also be a closing trade as shares are down 9 cents to $15.04 — very near the middle strike, or body, of the fly and open interest is sufficient to cover in all three contracts. In fact, the Jan 15s have open interest of 421K and currently the second biggest position in the XLF.

Implied Volatility Mover

CBOE Volatility Index (VIX) is down .97 to 18.42, even as S&P futures fell on poor jobs numbers and stocks opened broadly lower Friday morning. The market’s “fear gauge” is easing as this week’s event risk has passed and on falling yield spreads on debt in Eurozone periphery countries. VIX is down 22.4 percent over the past three days. Meanwhile, the 20-day statistical volatility of the S&P 500 has been moving higher. The 20-day is now 17.1 percent, compared to 13.4 percent for the 60-day. In other words, the big disparity between SPX actual and implied volatility has narrowed substantially since Tuesday.

Unusual Volume Movers

Bearish activity detected in Intercontinental Exchange (ICE), with 3692 puts trading, or 6x the recent avg daily put volume in the name.

Bullish flow detected in TakeTwo Interactive Software (NASDAQ:TTWO), with 2231 calls trading, or 4x the recent avg daily call volume in the name.

Bullish flow detected in Gold Fields (NYSE:GFI), with 7511 calls trading, or 3x the recent avg daily call volume in the name.

Increasing volume is also being seen in Motorola (MOT), Amgen (NASDAQ:AMGN), and MEMC (WFR).

Source: Friday Options Recap