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Sentiment

Major averages are holding modest gains in slow trading Monday. With no earnings or economic data to guide the morning action, stocks were mixed early. The Dow Jones Industrial Average fell into the red weighed down by losses in American Express (NYSE:AXP), Boeing (NYSE:BA) and Walmart (NYSE:WMT). The NASDAQ moved modestly higher. The action stayed mixed through midday and then the major averages found modest strength heading into the final two hours of trading. The Dow is now up 6 points and the NASDAQ has added 13.5. With about an hour left to trade, the CBOE Volatility Index (.VIX) is down .25 to 15.86 and one point off session highs. Trading in the options market remains active, with about 15.2 million calls and 4.4 million puts traded so far.

Bullish Flow

15.2 million calls and 4.4 million puts traded so far, yielding a total put-to-call ratio of just 29. However, heavy ex-div trading in a handful of exchange-traded funds is distorting the ratio. Call volume in the iShares Emerging Markets Fund (NYSEARCA:EEM) is approaching 5 million. 3.3 million calls have traded in the iShares Brazil Fund (NYSEARCA:EWZ). iShares MSCE EAFE Fund (NYSEARCA:EFA) is also subject to ex-div trades.

Eastman Kodak (EK) adds 32 cents to $5.85 and options volume is 5X the average daily, with 32000 calls and 3000 puts traded through midday. The top trades look like Jan 5. – 5.5 call spreads, sold at 34 cents, 5000X and 4750X. Volume in the Jan 5s is snow 12465 and in the Jan 5.5s, 11090. The spreads might roll up in strikes after an impressive 26.6 percent rally in EK since December 7. Jan 6 and 7.5 calls are seeing interest as well. Implied volatility is up 1.5 percent to 62.5.

Bearish Flow

From Steve Smith. Crown Holding (NYSE:CCK), the package and container company, sees a notable trade as the Feb. $32 straddle trades 4,250x in what looks like opening sale for a $2.55 net credit. Shares have gained some 40% since their June low and hit a 52-week high of $33.80 last week and are off 40c to $33.10 today. The company is set to report earnings late-Jan, early-Feb.

Implied Volatility Mover

38000 calls and 7900 puts traded in natural gas producer Chesapeake (NYSE:CHK) early Monday. Shares are up $1.30 to $24.60 on news Carl Icahn has increased his stake in the company to 5.8 percent, saying shares are undervalued, according to a 13D filing. Shares are up and Jan $25 calls are the most actives. The top trade is a block of 3000 at 61 cents. Beyond that, most of the action has been smaller lots. The next biggest trade is 442 contracts at the 68-cent asking price. 14,400 now traded. Jan 24, 26 and 27 calls are busy as well. The Jan 25 is the most actively traded put. Implied volatility is up about 3.5 percent to 39.

Source: Monday Options Recap