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Sentiment

Stock market averages are holding gains in a relatively quiet session Thursday. The underlying tone of trading remained positive for a third day after Eurozone equity markets rallied around news ECB officials agreed to offer more loans to troubled European banks. UK’s FTSE paced the advance with a 3.7 percent surge. In the US, the domestic economic calendar included one sole stat, which showed jobless claims increasing by 6,000 to 401K last week and in-line with expectations. Overall market action now has a wait and see feel heading into key monthly jobs data Friday morning. Economists expect to see the US economy adding 83K new jobs in September and the unemployment rate holding steady at 9.1 percent. The Dow Jones Industrial Average is up 100 points ahead of the data and the tech-heavy NASDAQ added 25. CBOE Volatility Index (.VIX) edged down .55 to 37.26. Trading in the options market is running about the typical levels, with 7.8 million calls and 8 million puts traded on the exchanges so far.

Bullish Flow

Nuance (NASDAQ:NUAN) adds 98 cents to $21.10 and today’s options volume is 4.5X the average daily. 9,180 calls and 345 puts traded on the Burlington, MA app software maker. Oct 22 calls, which are 4.3 percent OTM and expiring in 15 days, are the most actives. 3,730 traded (60 percent Ask) against 2,642 in open interest. Another 3,500 Oct 21 calls changed hands (73 percent Ask) against 3,897 in open interest. The flow seems to include some opening and closing activity, but overall sentiment seems bullish, as the stock rallies 35.4 percent off Aug 8 lows and now tests a previous support/resistance level near $21.25. Shares moved up Tuesday on news iPhone 4s will offer dictation to support multiple languages. Nuance is the voice to text software provider.

Henry Schwartz notes early Thursday: Gaming stocks seeing heavy option volume this morning with many names up sharply. Las Vegas Sands leads (NYSE:LVS) in volume, with 24K calls trading, nearly 3x the number of puts. Weekly 41 strike calls that expire tomorrow are most active, and one large spread traded in which a customer bought 3000 Oct 40c to sell 2000 oct 36 calls. Yesterday a customer bought 4000 Jan 46c for 2.77 on the ISE to open a new position that is up nearly $400K in value today.

Bearish Flow

EBAY adds 62 cents to $31.17 and is on a three-day 10.8 percent run higher. Some investors apparently see the strength as an opportunity to write April 35 calls on the stock. The top trade is a 4,453-contract block at $2.35 on ISE and an opening seller, according to data from the exchange. 18,321 now traded against 592 in open interest. The contract is 12.2 percent OTM with a .42 delta. A total of 30,000 calls and 5,900 puts traded on Ebay so far today. Oct 32, Oct 33, Jan 31, and April 41 calls are seeing interest as well. Implied vols are down about 5 percent to 52.

Implied volatility Mover

MBIA shares have added 37 cents to $8.25 and overall options volume is running 3.5X the daily average for the mortgage insurance company, with about 15,000 calls and 2,400 puts traded in MBI so far. October 9 calls, which are now 9.1 percent OTM and expiring in 15 days, are the most actives, 5,188 traded (66 percent Ask) against 2,597 in open interest. Oct 8, Oct 10, Nov 8 and Nov $11 calls are seeing interest as well. Implied volatility in options on the stock is up 9 percent and elevated at 113. Bullish flow in MBI and higher vols are probably related to a court decision and possible settlement payment in a court case. Lawyers from MBIA and BofA Countrywide gathered yesterday to argue causation and liability claims in a mortgage case before NY Supreme Court Justice Bransten.

Source: Thursday Options Recap