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Sentiment

Stocks are trading mixed and market action is slowing ahead of the weekend. The underlying tone of trading turned a bit more upbeat after European stock benchmarks moved higher on news France and Germany have agreed on a plan to help debt-strapped Greece. The euro recaptured 0.7 percent on the buck.

The domestic economic news remained uninspiring after the University of Michigan said its Consumer Sentiment Index was only 71.8 in mid-June. Economists were looking for an increase to 74.5 from 74.3. However, the List of Leading Indicators rose 0.8 percent in May, significantly better than the 0.2 percent that was expected.

Stock market averages were broadly higher at midday despite the mixed data, but then trading turned choppy in afternoon action. The Quadruple Witch expiration is probably affecting trading. The Dow Jones Industrial Average is holding a 62-point gain, but a disappointing profit forecast from Research In Motion (RIMM) is weighing on tech shares. The Nasdaq is down 1.5 points. CBOE Volatility Index (VIX) gave back 1.09 to 21.64. Trading in the options market remains somewhat defensive, with 7.4 million calls and 8.4 million puts traded across the exchanges so far.

Bullish Flow
Southwest Airlines (NYSE:LUV) adds 22 cents to $10.99 and morning trades in the airliner include a multi-exchange sweep of 4,191 July $11 calls at 40 cents when the market was 30 to 40 cents. 7,293 traded against 361 in open interest. Implied volatiity in LUV options is also moving, up 7 percent to 32.5. Airline stocks are broadly higher today after crude fell to its lowest levels since February. Crude is down $1.88 to $93.07 per barrel.

Bearish Flow
Harbin Electric (NASDAQ:HRBN) adds 90 cents to $7.88 and is trying to rebound from yesterday's 51.2 percent plunge. The volatility was attributed to a negative Citron Research piece (unconfirmed). Meanwhile, options action in the Chinese electrical equipment maker remains defensive. 11,000 calls and 15,000 puts traded in the name so far. July 5 puts, which are 36.5 percent OTM and expiring in four weeks, are the most actives. 5,123 traded (58 percent Ask) vs. 3,208 in open interest. Soon-to-expire Jun 5 puts, Jun 7.5 puts, and Jun 7.5 calls are busy as well.

Apple (NASDAQ:AAPL) is off $2.16 to $323 and now down 7.1 percent month-to-date. Shares are testing a previous support level around $324 and, at these levels, would close at their worst levels of 2011. Meanwhile, in options action, Jun 325 calls are today's most actively-traded equity options contract. 40,777 traded against 12,145 in open interest. The contract is falling more than $2 OTM ahead of the expiration and the market is now 34 to 35 cents. Premium sellers are active in the contract, probably betting that the stock won't recapture $325 before the June contracts expire.

Implied Volatility Mover
Research In Motion was reeling Friday morning after posting better-than-expected first quarter EPS numbers, but revenues that fell short of Street estimates. The company also slashed its outlook for the second quarter and the full year. It was the subject of multiple broker downgrades this morning. As a result, RIMM is down $6.96 to $28.39 and falling to levels last seen in the fall of 2006. Options are heavily traded in the early going. 99,000 calls and 22,000 puts so far. The top trade is a Jan 30 – 35 put spread sold at $3.05, 29000X and probably rolls a position down in strikes now that the 35s are deep ITM. Implied vols are down 22 percent to 50.

Source: Friday Options Recap