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Sentiment

Stock market averages are holding modest gains, but trading remains cautious after a very volatile week on Wall Street. With no economic data or earnings of significance to guide trading, some of the focus is on the commodities market. Gold sustained its biggest one-day loss in five years and silver plummeted 18 percent to suffer its largest decline since 1984. Crude oil is testing $80 after a three-day loss of almost $7. The fear reflected in the commodities market is of recession, with some of the talking heads even uttering the word Depression with respect to the European economy. Stock valuations, fundamentals and news are all taking a backseat to macro trends. Fear is elevated and investors are now seeking liquidity after a two-day 675-point plunge in the Dow Jones Industrial Average. Options on Spiders, SPDR Financials (XLF), and other ETF/index products are driving about half the flow in the listed options market over the past month. Yet, things have settled down a bit heading into the closing bell Friday. The Dow Jones Industrial Average is up 15 points and the tech-heavy NASDAQ has added 22.8. CBOE Volatility Index (.VIX) is up .62 to 41.97, as risk perceptions remain high heading into the weekend. Trading is very active in the options market for a second day, with 9.1 million calls and 9.1 million puts traded so far.

Bullish Flow

JPMorgan (JPM) is up 20 cents to $29.47 and attempting to stabilize after a 5-day 13.4 percent slide that sent shares to new 52-week lows of $28.53 intraday yesterday. Sentiment in the options market early Friday seems a bit less bearish. 21,000 calls and 15,000 puts traded on the bank in the first thirty minutes. The top trade is a 5,000-contract block of Mar 38 calls at 85 cents on ISE when the market was 81 to 85 cents. Sentiment data indicate a firm opened a new position. March 38 calls on JP Morgan are 29 percent OTM, but that might not be too much of a stretch since the stock was north of $38 just 16 trading days ago. Oct 30 calls on JPM are seeing interest as well, with another 4,000 traded in the first 30 minutes of Friday’s session. Meanwhile, implied volatility in option on the bank has eased about 4 percent, but remains elevated at 60 (52-week range is 17.5 and 73.5).

Dean Foods (DF) adds 24 cents to $8.82 and a noteworthy options trade in the Dallas, TX dairy products company today is a multi-exchange sweep of 4,775 Oct 10 calls at 15 cents. Sentiment data indicate a customer bought-to-open. 5,377 now traded against 452 in open interest. Oct 10 calls on DF are 13.4 percent OTM with a delta of .25 and 28 days of life remaining. Shares are down 28 percent over the past two months, but have shown some relative strength over the past two days -- up 7.2 percent since Wednesday. No recent headlines on the stock. Next earnings due early-Nov and outside the October expiration

Bearish Flow

The top equity options trade so far today is in BofA (BAC). After touching $6 even and closing at a new 52-week low of $6.06 Thursday, shares are up 23 cents to $6.29 Friday. In options action, a 40,000-contract block of Feb 3 puts was bought on the bank at 24 cents per contract. It was part of a 1X2. The strategist also sold 20,000 Feb 9 puts at $3.03. The spread possibly rolls a bearish position or hedge down in strikes. Feb 9 puts on BofA saw opening activity on May 23-24 when the stock was near $11.50 and 82.5 percent above current levels. At that time, the contract traded at 38 cents.

Implied Volatility Mover

Volume and implied vols are higher in iShares Silver Fund (SLV), as the metals continue to suffer heavy losses Friday. Gold is down $84.9 to $1,654.5 an ounce and copper lost 20 cents to $3.28. Silver is down $5.78 to $30.8 and has given up almost $10, or 23.9 percent, since Wednesday. SLV is trading down $5.10 to $29.82 and today's options volume in the ETF is about 400K calls and 330K puts. Players are jockeying for position ahead of the white metal's next short-term move. Oct 30 puts and 32 calls are the most actives in the ETF. More than 20K traded in both. Meanwhile, implied volatility in the options on SLV is 31 percent higher to 66 today. After a two-day 65 percent increase, vols are not far from the highs (69.5) seen after the volatile 5-day sell-off in Silver that ended on May 5.

Unusual Volume Movers

Bullish flow detected in ProShares UltraShort Gold (GLL), with 7840 calls trading, or 2x the recent avg daily call volume in the name.

Bearish activity detected in Pan American Silver (PAAS), with 6025 puts trading, or 8x the recent avg daily put volume in the name.

Bullish flow detected in USEC (USU), with 3727 calls trading, or 9x the recent avg daily call volume in the name.

Meanwhile, high options volume is being seen in Mosaic (MOS), Hewlett Packard (HPQ), and Yahoo (YHOO)

Source: Friday Options Recap