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Sentiment

Major averages are holding modest gains on mixed earnings news Wednesday. Data was in focus Wednesday morning after the Commerce Department reported that the US economy grew at a 2.6 percent annual rate in the third quarter, which was slightly less than the 2.7 percent that economists were expecting. However, a separate report released later showed Existing Home Sales up to a better-than-expected 4.68 million annualized rate in November, up about 5 percent from October levels and slightly better than the 4.63 million that economists had expected. The earnings calendar remains light. Walgreen (WAG) is seeing post-earnings strength. Nike (NYSE:NKE) slid on disappointing results. Overall, market action remains uneventful. The Dow Jones Industrial Average has traded in a 39-point range and added 24 on the day. The NASDAQ gained 4. The CBOE Volatility (.VIX) is down .92 to 15.57 and falling to its lowest levels since April. Volume is slowing ahead of the three-day weekend. 8.9 million calls and 4.7 million puts traded so far.

Bullish Flow

Looks like speculative call buying has returned to Sirius Satellite (NASDAQ:SIRI). Shares are up a dime to $1.57 and 35,000 contracts traded, which is 4X the expected for midday and compares to put volume of 7,700 contracts. Jan 1.5 calls are the most actives. 13,290 traded (71 percent ask). Mar 1.5. June 1.5, and Jan 2 calls are seeing interest as well. The Mar 1.5 is the most actively traded put. Implied volatility is up 17.5 to 47.5. Shares are in the midst of a two-day 12.8 percent rally, helped today by news Sirius XM Radio will be standard equipment on new BMW motorcycles.

Liz Claiborne (LIZ) loses a penny to $7.68 and options are busy for a second day. July $10 and Jan 6 calls were busy yesterday (see 12/21 color). Today, the July $10s are again actively traded. The top trade today is a block of 5000 at 65 cents when the market was 50 to 65 cents. April 7 and 8 calls are busy as well, with 1748 and 1266 traded, respectively, and 97 percent trading at the ask. Still no news to explain the apparent speculative call buying in LIZ.

Bearish Flow

BHP adds 59 cents to $91.57 and a block of 6,347 Jan 85 puts at 65 cents on ISE is an opening customer buyer, according to ISEE data. 8,250 now traded. The bearish trading comes after an 11.1 percent month-to-date rally in the share price.

Implied Volatility Mover

20,000 Puts and 2,100 calls traded on the SPDR Retail Trust (NYSEARCA:XRT). Shares are off 6 cents to $48 and one investor buys a block of 11000 Jan 48 puts at 85 cents each. 12,588 traded vs. 8,112 in open interest. After rallying 32.6 percent from the end of August to the beginning of December, the rally in XRT has stalled and the fund has been trading mostly sideways since 12/2. Implied volatility is up about 10 percent to 17 today, compared to a 52-week high and low of 44 and 15.75.

Source: Wednesday Options Recap