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Sentiment

Stock market averages are deep under water following a second day of disappointing economic news. Investors seemed to shrug off much weaker-than-expected Chicago PMI and consumer confidence numbers Tuesday. The Dow Jones Industrial Average rallied in the final hour and finished up 128 points. Today’s data wasn’t so easily brushed aside, however, after ADP reported that the US economy added just 38,000 jobs in May. Economists were looking for an increase of 170,000 and the news forced many to slash estimates for Friday’s jobs report. Meanwhile, the day’s other data included an ISM Index at 53.5 in May, down from 60.4 in April and also below economist estimates of 57.6. The bright spot was a .4 percent uptick in construction spending, but that was for April. The focus is primarily on the poor May jobs number and, while bonds and gold rallied, crude and stocks fell. Crude oil is off $2.41 to $100.29 a barrel. The Dow Jones Industrial Average gave up 225 points and the tech-heavy NASDAQ lost 53. CBOE Volatility Index (.VIX) gained 2.14 to 17.59 and options action is clearly more defensive, with 6.7 million calls and 7 million puts traded so far.

Bullish Flow

Apollo Group (NASDAQ:APOL) is up 89 cents to $42 amid gains in the for-profit education names on talk regulations for gainful employment will be released tonight (Briefing). The sector (CECO, COCO, STRA, DV) is seeing strength and APOL options are active. One investor bought 13,000 APOL. Jun 44 calls at 95 cents each. The position was tied to 416K shares at $41.90 and looks opening. 14,067 now traded. Jun 41, 42, and 45 calls are busy. June 39 and 40 puts are seeing interest as well. Meanwhile, APOL implied vols jumped 15.5 percent to 47.

Bearish Flow

American Tower (NYSE:AMT) loses 92 cents to $54.26 and is falling to session lows. Midday options action included several multi-exchange sweeps of Jun 52.5 puts. 2,508 traded at the 35-cent asking price and 1,661 at 30 cents. 7,175 now traded. Looks like downside put buying and is perhaps closing trades. Open interest in the June 52.5 put is 12,028 and currently the biggest position in the Boston, MA communication equipment company.

Aloca (NYSE:AA) loses 37 cents to $16.44 and an investor sells 11,000 Jan 17.5 calls at $1.21. The trade might exit a position on diminishing hopes for a rally beyond $17.5 through the January 2012 expiration. Volume is 14,983 agianst 29,283 in open interest. The contract is falling 6.4 percent OTM and has a delta of .45. Alcoa is one of 29 Dow stocks in the red through midday Wednesday. Only Coca Cola (NYSE:KO) is above water.

Implied volatility Mover

Nokia (NYSE:NOK) implied volatility is higher following a second day of very heavy trading in NOK options. Volume picked up yesterday, as shares sank 14.4 percent on a revised second quarter and fiscal year outlook. NOK is down another 29 cents to $6.73 and sinking to new 52-week lows today. Options volume is 190,000 calls and 49,000 puts, or 11X the average daily for the name. June and July 7 calls, which are now 4 percent OTM, are the most actives. June 7s have traded more than 50,000 contracts and volume in the July 7s is 40,500. While some investors are likely buying premium and bottom fishing after the recent slide in the stock price, others are probably liquidating positions opened in previous trading sessions. Meanwhile, implied volatility in NOK has surged another 41 percent to 50, as the market seems to be expecting the gyrations in Nokia shares to continue in the weeks ahead.

Source: Wednesday Options Recap