With no economic data or earnings of importance to guide morning trading, action across the Atlantic continues to drive the activity on Wall Street. Germany’s DAX rallied 4.1 percent and helped pace advance a rally in Eurozone equity markets after a German court struck down a lawsuit that would have blocked Germany’s ability to offer aid to Greece and other troubled nations. The gains in Europe helped to set a positive tone for trading early today. The euro is also responding and, after testing support near 1.4 yesterday, is up .9 percent to 1.409 against the buck late-Wednesday. Gold, which has set up an ominous double-top formation on the daily chart, tumbled $51 to $1812.5 an ounce. Crude oil jumped $3.26 to $89.25 on hopes for the global economy. Meanwhile, the Dow Jones Industrial Average is up 250 points and the tech-heavy NASDAQ gained 70. CBOE Volatility Index (.VIX) is down 3.58 to 33.42 and overall options volume is light. 7 million calls and 6.2 million puts traded so far.
Bank of America (BAC) adds 48 cents to $7.47 and has retraced 40.7 percent of the $1.18 per share loss suffered over the previous three trading days. A noteworthy options trade in BAC Wednesday is a 36,800-contract block of Jan $11 calls, bought at 23 cents and tied to 345K shares at $7.32. Jan $11 calls on BofA are 48.3 percent OTM and have 154,861 in open interest. So today’s trade might be a closing transaction. Total options volume is 221K calls and 152K puts, which is only about half the typical volume for the bank. Anxiety levels seem to be easing a bit after the US major banks took another hit Tuesday on reports Federal regulators have filed lawsuits against 17 institutions related to soured mortgage securities. Implied volatility in BAC options is down 12 percent to 75 Wednesday and well off the extremes near 150 percent seen during the panic sell-off of 8/8.
Big Print in Intel (INTC) Wednesday after a 50000-contract block of Dec 25 calls is bought at 9 cents per contract. Shares are up 40 cents to $19.94 and Dec 25 calls on Intel are 25.5 percent OTM with a delta of .07 and 16,251 in open interest. INTC is up today and has recaptured 52.6 percent of a 5-day 3.7 percent skid. Yet, the stock is down 13.7 percent since July 22, when shares of the chipmaker traded at $23.13.
Starbuck’s (SBUX) is up $1.32 to $39.08 and put options are brewing on the stock today. 18,000 contracts so far. Typical volume is 5,930 and 7,000 calls traded in the name. The top trade is a part of a spread, in which the strategist sold 3,600 Oct 34 puts at 67 cents and bought 1,800 January 38 puts at $3.05, creating an Oct 34 – Jan 38 (2X1) put ratio spread for a $1.71 net debit. It might be a roll out to January from October and/or it’s a bet that shares will fall through January 2012, but not drop to less than $34 through October.
Implied volatility Mover
Yahoo (YHOO) adds 72 cents to $13.63 and options on the Internet giant are busy early Wednesday after the company said Carol Bartz has been removed as Chief Executive. Shares are rallying around the news and one investor sells 26,000 Oct 20 calls on YHOO at 7 cents. It’s likely a closing trade, as the contract is 46.7 percent OTM and has 178,837 in open interest, which is the largest position in Yahoo today. Another 27,000 recently traded at 7 cents. Today’s volume of 55,000 represents 31 percent of the existing OI in the contract. 94,000 calls and 14,000 puts traded in Yahoo total and implied volatility in the options on stock, which jumped 14 percent Tuesday (see 9/6 color), is flat today at 54.