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Sentiment

Stock market averages are holding gains on a relatively quiet day of trading Friday. The day’s economic news was mixed. The latest retail sales report showed a .5% increase in July, which was in-line with expectations. However, the University of Michigan reported that its index of consumer sentiment sank to only 54.9 in August, down from 63.7 in late-July and well below economist estimates of 62.5. The data didn’t seem to have much market impact, however, and the Dow Jones Industrial Average was able to build on Thursday’s 423-point rally through midday. Strong gains in the eurozone, including a 4% rally in France’s CAC 40 and 3.5% rise in Germany’s DAX, seemed to have eased some of the recent anxiety levels about the debt crisis and potential problems for European financial institutions. The Dow Jones Industrial Average is now up 110 points and the tech-heavy Nasdaq gained 14.5. CBOE Volatility Index (.VIX) gave up 2.55 to 36.45. Trading in the options market remains active, but well off the record-setting pace seen earlier in the week. 8.5 million calls and 8.4 million puts traded so far.

Bullish Flow

Sysco (NYSE:SYY) sees upside call buying ahead of earnings. Shares are up 64 cents to $29.40 and the top trade is a 682-lot of Aug 30s at 40 cents when the market was 35 to 40 cents. It was part of a sweep of 1,429. 3,689 traded against 2130 in open interest. A separate multi-exchange sweep of 1327 Aug 31 calls traded at the 20-cent asking price. 2,230 changed hands vs. 5,762 in open interest. Implied volatility is down about 2% to 33 ahead of the results, due Monday morning. Shares rallied 10.7% to 52-week highs on 5/9 after earnings were last reported, but then gave back the gains through early August and are down 6.9% since that time.

Ford (NYSE:F) adds 14 cents to $11.08 and a Sep 12 – 13 call spread trades on the automaker at 21 cents, 34,476X on ISE. Data indicate a customer rolled a position down in strikes. Sep 13 calls on Ford are 17.3 percent out-of-the-money with five weeks of life remaining and open interest of 84K. Today’s spread trader is possibly closing out the position on diminishing hopes for a move beyond $13, but opening a new position in the 12s to keep a bullish position open on Ford. Shares touched new 52-week lows of $9.87 Monday, but are up 12.3% since that time. Still, F is a far cry (-41.5 percent) from the 52-week highs seen in early 2011.

Bearish Flow

Arm holdings (NASDAQ:ARMH) adds 20 cents to $25.29, even after BofA/Merrill downgraded the stock to Underperform today. Early options trades on the chipmaker include a 2100-contract block of Aug 23 puts at 35 cents on ISE. Sentiment data indicate a closing purchase and, if so, it might offset one leg of an Aug 23 – 25 put spread that was initiated in ARMH yesterday (see 8/11 color). The Aug 23 put on ARMH is 9% OTM and expires in a week. 3,138 now traded against 3,829 in open interest.

Implied Volatility Mover

SPDR Financials (NYSEARCA:XLF) have given up early gains and are now off a dime to $12.77. Yet, implied volatility is falling, as some of the extreme fear that rattled the sector Monday appears to have eased in recent days. XLF, which holds all of the financial-related names from the S&P 500, hit a 52-week low of $12.04 Monday amid very heavy trading in the options. 1.2 million puts and 280K calls traded in the product Monday and implied volatility surged 80% to new 52-week highs of 70.4. Since then, XLF has moved higher in two of four trading sessions and recaptured 5.2%. Active trading continues in the options, but the volume is much lighter than earlier this week. About 400,000 puts and 100,000 calls so far. Sep 12 puts are the most actives and seeing mixed trading at the bid and offer. Meanwhile, implied volatility has eased another 9% to 49. While still up 25.6% on the week, volatility in the financial ETF is substantially lower than the levels seen early in the week. Maybe the sky isn’t falling after all.

Unusual Volume Movers

Bullish flow detected in Amarin (NASDAQ:AMRN), with 9,203 calls trading, or 2x the recent average daily call volume in the name.

Bullish flow detected in Avon Products (NYSE:AVP), with 12,099 calls trading, or 6x the recent average daily call volume in the name.

Meanwhile, high options volume is being seen in Alcoa (NYSE:AA), NVidia (NASDAQ:NVDA), and the Semi HOLDRS (NYSEARCA:SMH).

Source: Friday Options Recap