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Sentiment

Major averages suffered modest losses, as weakness in commodities and bonds seemed to outweigh a round of mostly positive economic data Thursday. The economy was back in focus early after the Labor Department reported that filings for jobless benefits declined by 34,000 in the week ended December 25. Economists were looking for a decline of 8,000. Separate data released later showed the Chicago PMI up to an impressive 68.6 in December, from 62.5 last month and easily topping economist estimates of 61.5. A third piece of data showed November pending home sales up 3.5 percent. Economists were looking for a decline of 3 percent. The data didn’t seem to matter much, however, and the aimless market action continued for another day. The tone of trading was a bit more cautious, as crude oil lost $2 and gold gave up $9. Agricultural commodities were also weak and equity markets closed broadly lower across Europe. Meanwhile, the ten-year Treasury bonds suffered a day of losses, but came off session lows heading into the final hour. None of this stirred up much volatility in the equity market. The Dow Jones Industrial Average has traded in another narrow 42-point range and is down 11 points. The NASDAQ lost 1.4. The CBOE Volatility Index (.VIX) is up .28 to 17.56. Overall options volume totals are light, with 4.1 million calls and 3.4 million puts on the tape so far.

Bullish Flow

BJ’s Wholesale (NYSE:BJ) rallied 7.1 percent yesterday after the New York Post reported that Leonard Green and Partners might make a hostile bid for the retailer if there isn’t an auction for the company during the next few weeks. Shares are up another $1.23 to $48.85 today and 5,500 call options have traded in BJ. The volume represents 7X the typical activity and 10X the day’s put volume. Jan 50 calls are the most actives. 2,143 traded and 96 percent trading at the Ask. Looks like players are buying Jan 52.5 and Mar 50 calls as well.

MIPS Technologies (NASDAQ:MIPS) saw a morning jump on heavy volume and is now up 6.9 percent to $15.69. Options action is heating up as well, with 7,550 calls and 730 puts traded. Jan 15 calls, which are now 69 cents in-the-money, are the most actives. 2,890 traded (68 percent Ask). Jan 17.5 and April 15 calls are busy as well. Implied volatility is up 2 percent to 53, with no news to explain the rally in the shares or bullish flow in the options of the Santa Clara, CA chipmaker today.

Bearish Flow

Nippon Telegraph and Telephone (NYSE:NTT) adds 28 cents to $22.80 and two blocks (3398X2) of Jun 22.5 calls trade at $1.05 and $1.10. Market was 95 to $1.35 at the time and this looks like an opening call writer, tied to 326K shares at $22.75. Shares rallied to a 52-week high of $23.97 when earnings were reported on 11/9, but have been drifting lower since that time.

Implied Volatility Mover

MBIA (NYSE:MBI) with a second day of relative strength and increasing call volume. Shares are up 68 cents to $11.04 after a filing with a Manhattan court released yesterday indicated that JP Morgan and Barclay’s have dropped their opposition to MBIA’s plan to restructure its business — Reuters. Shares saw a spike on heavy volume yesterday morning and are now up 16 percent since Tuesday. MBI options are busy for a second day as well. 88,000 calls and 8,950 puts traded in the name yesterday. 18,000 calls and 2,180 puts so far today. The top trade is 3,974 Jan $11 calls at 70 cents and might be a liquidating sale as shares rally above the $11 strike price. 9,970 traded (70 percent Bid). Jan 12.5, Jan 14, and Feb 11 calls are seeing interest as well. Implied volatility is up 9 percent to 85.5.

Source: Thursday Options Recap