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Sentiment

Market action remains uneventful, but stock market averages are holding modest gains on upbeat economic data Friday. The table was set for morning gains on Wall Street after a report showed the nation’s trade balance narrowing to $38.7 billion in October. Economists were looking for it to hold steady around $44.6 billion. Separate data released later showed the University of Michigan Consumer Sentiment Index up to 74.2 in December, from 71.6 in late-November and ahead of expectations of 72.5. Quiet trading overseas and steady action across most of the commodities market also seemed to help keep volatility at bay. Meanwhile, General Electric (NYSE:GE) is leading the Dow Jones Industrial Average higher on news it’s raising its dividend. However, trading remains somewhat cautious and some players are keeping an eye on the bond market, where Treasurys were pummeled and yields jumped Tuesday and Wednesday. The benchmark ten-year Treasury is down 19/32nd and its yield is 3.28 percent heading into the close Friday. Meanwhile, the Dow has added 16 points and the NASDAQ up 18.5. The CBOE Volatility Index (.VIX) gained .14 to 17.39. Options action is slowing ahead of the weekend. 8.5 million calls and 4.75 million puts traded so far.

Bullish Flow

GE is up 62 cents to $17.75, the best gainer in the Dow, and options volume is 3.5X the average daily after the company announced plans to increase its dividend 17 percent to 14 cents, citing strength in its finance arm. Call volume is approaching 300,000 contacts, compared to 84,000 puts. The top trade is a block of 9000 Dec 18 calls apparently sold at 14 cents. It might be a closing trade, as open interest is 25,700 and the contract is 25 cents out-of-the-money with five trading days of life remaining after today. Jan 19 calls are the most actives. 52,855 traded. Dec 17, Jan 17.5 and Jan 20 calls are very busy as well. GE implied volatility is up 8 percent to 27, compared to a 52-week high and low of 55 and 23.

AIG (NYSE:AIG) adds another $1.79 to $49.57 and 27K AIG calls traded in the first thirty minutes of Friday’s session, which is more than 4X the put volume. Shares rallied yesterday on news it will repay the Federal Reserve and the Treasury. The sentiment has carried over into today’s session. December 50 calls are the most actives. 3390 traded (55 percent Ask). Dec 45, Jan 55 and Jan 50 calls are busy as well.

Bearish Flow

Gannett (NYSE:GCI) adds 20 cents to $15.73 and up 13.3 percent in the past two weeks. Some investors might be looking to protect recent gains, as it appears that the Jan2012 15 puts are being bought-to-open at $2.50 per contract. 2675 traded (90 percent ask) vs. 711 in open interest. Jan12 12.5 puts are seeing interest as well, with another 640 traded.

Implied volatility Mover

Tennet Healthcare (NYSE:THC) adds $2.38 to $6.67 on news Community Health (NYSE:CYH) made an unsolicited bid for the company. Options volume is running about 30X the recent average daily, with 42K calls and 17K puts traded so far. The top trade looks like a collar, in which the investor sold Jan 7.5 calls at 10 cents to buy Jan 5 puts at 10 cents, 10000X, against 1 million shares at $6.45. The next biggest trades are blocks of Feb 7 calls on the bid (2725X2) and also look tied to stock. Implied volatility is up 11 percent to 40.5 and shares are trading above the $6 bid after THC rejected the offer as inadequate. Reuters writes that CYH might need to raise its bid.

Unusual Volume Mover

Bullish flow detected in RadioShack (NYSE:RSH), with 5156 calls trading, or 4x the recent average daily call volume in the name.

Bullish flow detected in Air Products and Chemicals (NYSE:APD), with 4451 calls trading, or 9x the recent average daily call volume in the name.

Bullish flow detected in Amylin Pharmaceuticals (AMLN), with 2271 calls trading, or 2x the recent average daily call volume in the name.

Increasing volume is also being seen in Pfizer (NYSE:PFE), Best Buy (NYSE:BBY), and Sandridge (NYSE:SD).

Source: Friday Options Recap