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Sentiment

Trading was slow through midday, but the selling pressure surfaced in the second half of trading Thursday after investors digested the latest speech from Federal Reserve Chairman Ben Bernanke. The other economic news was mixed. Weekly Jobless Claims increased by 2,000 to 414K in the period ended Sep 3. Economists were looking for a decline of about 10,000. Meanwhile, the Trade Balance narrowed to $44.4 billion in July and much more than expected thanks to record exports of autos, airplanes and other goods. Trading was steady on the mixed data and into midday, but then stocks faltered in afternoon action after Bernanke delivered his speech at 1:30 ET. Although the Fed Head pledged to help the economy as needed, he failed to offer any concrete details of plans for monetary stimulus. Collective disappointment hit the Street and the Dow Jones Industrial Average is sporting a 100-point loss heading into the final half hour. The tech-heavy NASDAQ lost 15. CBOE Volatility Index (.VIX) is up .96 to 34.34 amid light volume in the options market. 6.6 million calls and 6.9 million puts traded across the exchanges so far.


Bullish Flow

Micron Technology (NASDAQ:MU) adds 25 cents to $6.31 and has now rallied 14.4 percent this week. Early options trades on the chipmaker include a multi-exchange sweep of 5,030 Sep 6 calls on the 37-cent bid. It’s likely a closing trade, as the contract is in-the-money, expires next week and has 60,655 in open interest. 5,788 now traded. A bit later, a September 6 – October 7 call spread traded at 2 cents, 14,200X on Micron. In this trade, the strategist was apparently closing September and opening in October. They’re probably still bullish on the stock, but are rolling up to out-of-the-money October options. September options expire at the end of next week.

Bearish Flow

EBAY adds 59 cents to $30.34 and a three-way spread is initiated in the online auctioneer after one investor sold 9,100 Sep 29 puts at 42 cents and bought the Oct 26 – 29 put spread at 81 cents, 10000X. The trade might roll a position opened last Thursday when 10,538 Sep 29 puts traded and open interest in the contract increased by 9,961 to 18,915 contracts. The strategist is closing out the Sep 29s to salvage the remaining time value and opening a new position in the Oct 26 – 29 put spread. After falling 17.7 percent in the first six trading days of August, EBAY shares have been see-sawing in a range in recent weeks. Earnings were last reported on 7/20. Today’s spread trader might be anticipating weakness in the stock through the next earnings release in mid-to-late October.

Implied volatility Mover

Upside call writers in Neoprobe (NEOP) Thursday. Shares are up 2 pennies to $3 and the top trade in the Dublin, OH biomedical company is a 2450-contract block of Apr 4 calls at 35 cents when the market was 35 to 45 cents. 7,560 now traded. Apr 4 call on Neoprobe is 33.3 percent OTM with a delta of .39 and no open interest. Meanwhile, implied volatility in NEOP options has eased 9.5 percent, but remains elevated around 100.

Source: Thursday Options Recap