Sentiment
Stock market averages are rallying despite poor housing data today. Strong economic data helped lift Hong Kong’s Hang Seng index 2 percent and Japan’s Nikkei rose 1.2 percent. Trading was orderly across the Eurozone and the market action overseas seemed to help set a positive tone for morning trading on Wall Street. The underlying tone remained cautious after data released at 10:00 Eastern time showed New Homes Sales at an annual rate of 298K in July. Economists were looking for an increase to 310K from 300K. The data had little market impact, however, and major averages were sporting solid gains through midday. Optimism that Fed Chair Ben Bernanke and other central bankers will offer soothing words at this week’s meeting in Jackson Hole, WY might be helping sentiment a bit today. For whatever reason, the rally gathered additional momentum in afternoon action. The Dow Jones Industrial Average is now up 268 points and the tech-heavy NASDAQ rallied 87 points. CBOE Volatility Index (.VIX) is down 6.40 to 36.04. Trading in the options market is a bit lighter than usual, with 8.8 million calls and 9 million puts traded so far. SPDR Gold Trust (GLD) loses $5.97 to $178.92 after the yellow metal came off yesterday’s record levels and traded down an impressive $54.7 to $1835 an ounce. Noteworthy recent options trades in the gold ETF include a Jan 150 – June 225 risk-reversal, 15000X on ISE. It traded at $4.60 BD-to-BD and appears to be a new position, based on sentiment data. Earlier in the day, an 11500-contract block of Sep 175 puts on the Gold ETF traded at $2.80 on ISE, and was also opening BD-to-BD. Volume in the contract is approaching 19,000, making it the most active in GLD so far today. United Therapeutics (UTHR) adds 48 cents to $47.74 and a Sep 45 – 50 put spread trades on the Silver Spring, MD drug-maker, 1500X on ISE. Sentiment data indicate that $2.35 was collected to open a new position. Shares gained 3.3 percent on 7/28 after earnings were reported, but it’s been mostly downhill from that point forward and UTHR is off 16.8 percent month-to-date. Today’s spread trader might be expecting the stock to recapture $50 through the September expiration and/or is a willing buyer of the stock at that price. Temple Inland (TIN) is under fire today and implied vols are up amid active trading in the options on the Austin, TX paper company. Shares are down 17.2 percent to $20.57 on reports the company is being sued for “loading up Guaranty Financial with risk securities, and contributed to its failure,” WSJ. Options volume in TIN is 20,000 calls and 12,000 puts. The top trades were initiated by one player. They sold 5000 Jan 32 calls at 22 cents, sold 1,000 Jan 30 calls at 53 cents, and bought 1500 Nov 29 calls at 60 cents. Open interest is sufficient to cover and the contracts are now deep OTM. So, it’s possibly closing activity. Sep 24 puts, Sep 25 calls, Nov 24 puts, and Oct 26 calls on Temple Inland are seeing interest today as well and implied volatility in the options has rallied 65 percent and is now elevated at 115. CBOE Volatility Index (.VIX) loses 6.40 to 36.04 and is now roughly 12 points, or 25 percent, below the 15-month high of 48 set on 8/8. The index is under pressure, even as actual volatility remains very high. The 30-day statistical volatility of the S&P 500 is 47.2 percent and signficantly more than VIX. Yet, the S&P 500 is rallying, fear is easing a bit, and VIX is falling today. Noteworthy options trades in the volatility index today include an Oct 22.5 - 25 call spread, sold at $1.85, 50000X. It possibly adjusts a position opened on 7/21, when the Oct 22.5 - Oct 30 call spread traded more than 53000X on the day. Or, if opening, it's possibly a bold bet that the volatility index will fall back below 22.5 through mid-October.Bullish Flow
Bearish Flow
Implied volatility Mover
