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Sentiment

Another day, another 500+ point swing in the Dow Jones Industrial Average. Market action remains extremely volatile through late-Thursday. The table was set for morning gains on Wall Street after Cisco (CSCO) rallied on better-than-expected earnings and weekly jobless claims fell below 400,000 for the first time in four months. Trading was orderly across the Eurozone and, after a 520-point plunge Wednesday, the Dow Jones Industrial Average bounced off deeply oversold levels at the open. The upward momentum carried through to midday and then gathered additional strength in the second half of trading. The flight-to-safety trade is OFF. The ten-year Treasury bond is getting clobbered and was recently down more than one-and-a-half points. Gold tumbled $41.2 to $1741.50 an ounce and crude oil bubbled $2.62 higher to $85.51 per barrel. The Dow Jones Industrial Average is up 500 points and the tech-heavy NASDAQ added 121.5. CBOE Volatility Index (.VIX) is down 4.61 to 38.38, but is far from imploding – as levels of realized market volatility remain exceptionally higher. Trading in the options pits has been so busy that our systems are having trouble keeping up. Approximately 10.6 million calls and 10.6 million puts traded across the exchanges so far.

Bullish Flow

Call options on NVidia (NVDA) are active today ahead of earnings. Shares are up 71 cents to $13.05 and Sep 17 calls on the graphics chipmaker are the most actives. 2,340 traded. Sep 15, 18 and 19 calls are busy as well. The Weekly $13 calls are also seeing some interest. About 13,000 calls and 3,350 puts traded in the name so far. Meanwhile, implied volatility in NVDA options is easing about 1 percent, but is elevated at 91 ahead of the results, which are due out after the closing bell today.

Emulex (ELX) adds 25 cents to $7.08 and Oct 8 calls on the Costa Mesa, CA data storage device maker are seeing interest ahead of earnings. The action includes a multi-exchange sweep of 2500 contracts at the 30 cent asking price. Data from ISE hints at customer buyer. 3,289 traded against 178 in open interest. The company reports after the closing bell today.

Bearish Flow

Sirius XM Radio (SIRI) adds a nickel to $1.78 and SIRI Jan 2 calls are the most actively traded equity options contract through midday Thursday. Volume is more than 40,800 against 274,317 in open interest, which is the biggest OI position in SIRI. The top trade is a 3054-contract block on the 30-cent bid and coincided with a 3054-contract block of Sep 2 calls at the 12-cent asking price. The spread, at 18 cents, appears to be rolling from Sep 2s to Jan 2s and possibly part of an overwriting strategy. The same spread traded at 17 cents, 1087X on ISE, where sentiment data is consistent with a roll out (buying back Sep to open in Jan – customer account). Sep 2 calls on SIRI have traded more than 13,000 against 47,714 in open interest.

Implied volatility Mover

Trading is active in Home Depot (HD) and implied volatility in the options on the home builder is easing today. 22,000 calls and 46,000 puts traded on the home improvement retailer so far. Shares are up $1.65 to $30.16 and Sep 32 puts are the most actives. 30,123 traded, including a 13306-contract block at $2.90, which is possibly a liquidating sale. The contract is 5.7 percent ITM and open interest is 31,755. Looks like Sep 33 puts are being sold as well. Implied volatility in HD options is down 15.5 percent to 42. Some investors might be unwinding defensive put positions in HD after a three-week 17.8 percent decline in the share price and ahead of earnings, due the morning of Aug 16.

Source: Thursday Options Recap