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Sentiment

Stock market averages gave up morning gains and are in the red late-Monday. The table was set for early gains on Wall Street following news that Osama Bin Laden had been killed by US Special Forces in Pakistan. Economic data was supportive as well. The ISM Index of manufacturing activity printed at 60.4 in April. Although that was down from 61.2 the month before, it was better than the 59.7 that economists had expected. Meanwhile, a separate report on construction spending showed a 1.4 percent increase in March. Economists were looking for 0 percent. Yet, market action had turned mixed into midday and stock market averages are sporting losses late in the session. There doesn’t appear to be a specific catalyst for the afternoon weakness. Action in the commodities market is mixed. While gold gained $1.90 to $1,558.3, crude slipped .49 to $113.44. Microsoft (NASDAQ:MSFT), Exxon (NYSE:XOM), and DuPont (NYSE:DD) are among the biggest losers in the Dow Jones Industrial Average. The Dow is down 5 points and 69 points from session highs. With thirty minutes left to trade, the NASDAQ is off 5.3 points. The CBOE Volatility Index (.VIX) gained 1.09 to 15.84. Volume in the options market is running about the usual, with 7.7 million calls and 6.2 million puts traded so far.

Bullish Flow

The top equity options trades so far today are in AT&T (NYSE:T) after an investor apparently sold the May 30 – Jun 33 call spread at $1.40, 19200X. AT&T shares are up 12 cents to $31.24 and have performed well lately, up 14.3 percent since mid-March. Today’s spread trader might be exiting the position in ITM May calls, which expire in 18 days, to open a new one in the OTM June call options. AT&T reported earnings on 4/20. Results were in-line and shares showed little reaction to the news.

Steve Smith writes for Whatstrading.com today: Yahoo (NASDAQ:YHOO) shares have popped 2.5% to a new 52-week high of $18.15 and have gained some 11% in the past week. This morning some notable prints on the call side as the June $19 calls sees a 10,000 contract block trade at 51c offer in what looks like opening purchase. The July $20 calls trade 7,600 (now total of 10,450) at the 36c asking price. Greenlight Capital disclosed a stake in Yahoo and the hedge fund said it was particularly interested in Yahoo’s China unit.

Bearish Flow

Tenet Healthcare (NYSE:THC) shares are down and implied volatility is up, even after Community Healthcare (NYSE:CYH) made a revised $7.25 per share all-cash bid for the company. THC is down 30 cents to $6.63 and May 6 puts have traded 13,000 contracts. 98 percent traded at the ask and implied volatility in THC options is up 36 percent to 42, as investors seem skeptical about the potential for a deal between the two managed care companies.

Implied volatility Mover

Las Vegas Sands (NYSE:LVS) calls are active and implied volatility is moving up ahead of earnings. 60,000 calls and 21,000 puts traded in the name so far. Shares are up 57 cents to $47.58 and May 50 calls are the most actives. 6,800 traded. The contract is 5.1 percent OTM and expires in 18 days. It has traded at a VWAP of $1.21 and has a delta of .35. The Weekly 48 and 50 calls are the next most actives. Looks like some investors are taking positions in OTM short-term calls ahead of the results. The top trades of the day are in the June 50 – 55 call spread, which was apparently bought at 74 cents, 732X. Overall, the flow seems to reflect bullish sentiment and implied volatility is moving up 7.5 percent to 48 ahead of the results, due tomorrow afternoon.

Source: Monday Options Recap