Sentiment
Wall Street wants to end the second quarter on a strong note. The Dow Jones Industrials are up for a fourth day and have rallied for a triple digit gain through late-Thursday. Gains in European markets and the euro helped set a positive tone for early trading. Stocks and the Eurozone currency moved higher after Greek parliament passed a second austerity bill – a move met with angry protests in Athens, but seen as critical in avoiding debt default. Investors also cheered the latest Chicago PMI, which jumped to 61.1 in June and significantly above economists' projections (of 54). However, tomorrow’s ISM index of nationwide manufacturing activity will hold greater sway than the regional PMI. Still, investors seemed generally pleased with the day’s news flow and the Dow has added 128 points. With forty-five minutes left to trade, the NASDAQ is up 30.CBOE Volatility Index (.VIX) lost .71 to 16.56. Trading is active due to end-of-quarter position squaring. 7.4 million calls and 7.1 million puts traded so far.
Bullish Flow
First Solar (FLSR) options are busy and implied volatility is easing after the company obtained $4.5 billion in loan guarantees from the Department of Energy. Shares of the solar panel manufacturer are up $8.36 to $137.78. Options volume is 27,000 calls and 23,000 puts, or 4X the expected for midday. July 140 call options are now 1.6 percent out-of-the-money and are the most actives. 5,370 traded. Jul 135 puts, Aug 145 calls, Jul 155 calls, Aug 125 puts and Jul 145 calls are seeing interest as well. Meanwhile, implied volatility in FSLR options is down 8 percent to 38.
Netapp (NTAP) shares are rallying, up $2.24 to $52.20, and options on the data storage products maker are actively traded. 12,000 calls and 4,700 puts in NTAP so far. July 52.5 calls, which are now 30-cent OTM, are the most actives. 4,800 have changed hands. July 50s are seeing interest as well. There seems to be a mix of buying and selling in both contracts. The relative strength and heightened activity in Netapp is being attributed to comments at the company’s Analyst Day, which is happening today.
Bearish Flow
July 123 - 126 - 129 put fly on the SPYders (SPY) is seeing interest for a second day. The spread traded at 39 cents, 46000X, Wednesday morning and at 32 cents, 31,000X, in afternoon trading yesterday. Today, shares have added $1.13 to $131.85 and the same position trades at 20 cents, 20000X. July 126 puts were sold at 28 cents for the body of the fly. The July 123 and 129 puts were bought at 15 cents and 61 cents, respectively, for the wings. A source on the exchange confirms 20 cents was paid and today's fly likely adds to the hefty positions opened yesterday. Looks like an Aug 122 - 126 - 130 put fly was initiated 20000X on SPY today as well. Since the middle strikes of these flys are below the current market price of the S&P 500 Trust, the spread activity over the past two days seems to reflect some underlying concerns about the outlook for the equity market heading into the third quarter.
Implied volatility Mover
Implied volatility in USEC (USU) is easing after the company secured agreements with strategic investors Toshiba Corporation and Babcock & Wilcox Investment. The uranium producer will now have more time to secure $2 billion in loan guarantees from the DOE to build the American Centrifuge plant in Piketon, OH. Shares are up 8.8 percent to $3.46 and one of today’s big percentage movers on the news. Meanwhile, options volume in USU is about 4,000 puts and 700 calls. Jul 4 puts are the most actives and are possibly seeing some liquidating trades, as 100 percent of the volume (3110 contracts) has been on the bid and implied volatility in USEC options is falling 16 percent to 116.5.
