Sentiment
Pre-earnings jitters and the European Debt Crisis are weighing on Wall Street Monday. With no economic data to guide the early action, the focus was on overseas markets after stock benchmarks fell across the Eurozone. The concern is that the debt crisis is spreading to larger countries after bond yields moved higher across Spain and Italy Monday. In the US, President Obama and Republican congressional leaders debated tax cuts Sunday, but failed to make any progress in providing any hard solutions to tame the country’s massive debt. Meanwhile, attention is beginning to shift to earnings. Alcoa (AA) unofficially kicks off the reporting season after the closing bell. Google (GOOG), Citi (C), and JP Morgan (JPM) report later this week. Then, the deluge of second quarter profit reports begins next week. Some pre-earnings anxiety is possibly weighing on sentiment today as well. The Dow Jones Industrial Average is down 180 points and the tech-heavy NASDAQ lost 62.4. CBOE Volatility Index (.VIX) rallied 3.02 points to 18.97. Trading in the options market is busy and reflects the negative underlying tone. 6.7 million calls and 7.8 million puts traded so far.
Bullish Flow
Clorox (CLX) surged to $71.98 through 2:00 ET and was recently up $1.92 to $70.03 on 4.5 million shares traded, which is 5X the typical volume. CLX options actions action is picking up as well. 15,000 calls and 1,500 puts traded in the name, a ratio of ten-to-one. July 70 calls, which are at-the-money with four days and one hour of trading life remaining, are the most actives. 4,537 traded. Jul 72.5, Aug 70, Aug 72.5, Oct 70 and Oct 72.5 calls are actively traded as well. Implied volatility in CLX options has more than doubled to 26. It's not clear what is driving the speculative activity because there are no headlines on the stock today.
Call buyers may be bottom fishing in Barclays Bank PLC this morning, as shares trade nearly 6% lower to 14.88, after setting a new 52wk low of 14.83 a few minutes ago. Buyer paid 35cents for 2700 July 15 calls as shares traded near 14.92. 30day ATM IV is up 9pts to 45%, a 25% lift and one of the most extreme spikes among financials. Total volume in BCS options exceeds 10,000 contracts, nearly 10 times the typical pace in the stock. (Updated by Henry Schwarz).
Bearish Flow
News Corp (NWSA) is under pressure and implied volatility is higher amid increased put activity. Shares are down 13.2 percent during the past four days and falling below a 200-day exponential moving average on concerns about the potential fallout from the phone-hacking scandal at its now closed News of the World weekly paper. 8,940 puts and 555 calls traded in NWSA. July 15 puts, which expire at the end of the week, are the most actives. 3,650 traded (98 percent Ask). Looks like buyers of Aug 12, Aug 14, Oct 12, and Jan 12.5 puts as well. Downside put buying has helped send implied vols in News Corp options up 30 percent to 48 on the day.
Implied Volatility Mover
Out of all 3639 listed products, 3122 (86%) are trading with 30day at-the-money Implied Volatilities higher on the day. Among liquid products, the largest increases include SWC (59.8% IV +16.0), CLX (28.3% IV +15.3), NOG (61.7% IV +13.9), EDZ (71.5% IV +13.2) and FAS (60.3% IV +12.8). Broad market benchmark SP500 index 30day ATM IV is at 16.5%, an increase of 3.1 points as the index trades near $1321.22, off -1.74%.
