Sentiment
Stock market averages are back under pressure amid ongoing worries about problems in the Eurozone. Germany’s DAX lost 1.8 percent and the euro gave up .8 percent on the buck after German leaders threw cold water on the idea of decisive action to help solve the debt crisis at an October 23 summit. Policymakers had been pushing for a resolution at that time. A weak reading from the NY Manufacturing Index, which fell to -8.48 in October, added to worries about the slowing global economy. Meanwhile, post-earnings weakness in Citi (C) and Wells Fargo (WFC) is weighing on the financials and probably causing some pre-earnings jitters. Although a number of widely helds have already released results, the floodgate doesn’t open on third quarter earnings until this week. IBM reports after the close. BofA (BAC), J&J (JNJ), and Coke (KO) are among the names reporting Tuesday morning. The tone of trading has turned decidedly more cautious after two weeks of gains and the Dow Jones Industrial Average is down 250 points. The tech-heavy NASDAQ lost almost 60. With just over an hour left to trade, CBOE Volatility Index (.VIX) is up 4.72 points to 32.96. Trading in the options market is slow today, with 5.7 million calls and 5.8 million puts traded across the exchanges so far.
Bullish Flow
BofA loses 8 cents to $6.11 and seems set to test its previous $6 support level ahead of tomorrow’s earnings release. $6 was a support area in September, but that level gave way on Oct 3 and BAC fell to $5.13 intraday on Oct 4. It is up 19.1 percent from that level and now focus turns to earnings. Shares are down ahead of the news, but overall options volume is running lighter than usual. 68,000 calls and 42,000 puts traded on the bank so far. Early trades include a multi-exchange sweep of 11,212 Oct 7 calls at 6-cent asking price. ISEE is reporting an opening customer buyer. 33,684 contracts now traded. Oct 7 calls on BofA are 14.6 percent OTM with a .13 delta and expiring at the end of the week. The stock last traded north of $7 on Sep 20.
Sprint (S) sees a modest spike and is up 5 cents to $2.84 midday after David Einhorn apparently made positive comments about the company at a value investing conference (Briefing). Overall options volume in Sprint so far is 22,000 contracts, which is much lighter than usual. However, the action is lopsided, as 17,000 calls and 4,660 puts traded on the stock. Recent trades include multi-exchange sweeps of Oct 3 calls at 8 and 9 cents. 11,275 now traded (74% Ask), as some investors seem to be looking for a rally beyond $3 in Sprint shares before the expiration, which represents a 6 percent jump over the next four days. The stock, which fell to 52-week lows of $2.22 a week ago, is already on a five-day 27 percent run higher. The company reported its best ever one day sales Friday on strong sales of iPhone 4s and iPhone 4.
Bearish Flow
Market Vectors Ag Fund (MOO), which holds names like Deere, Monsanto, and Potash, is down $1.09 to $47.32 and one player pays $1.75 for Feb 40 puts on the ETF, 10700X. 11,762 now traded against 7 contracts in open interest. The contract is 15.5 percent OTM with a -.21 delta and 123 days of life remaining. Shares have been MOOving up over the past two weeks and added 15.1 percent since Oct 3. The ETF recorded a 52-week low of $39.86 intraday on Oct 4 and today’s put buyers might be looking for the stock to revisit that level, or worse, in the months ahead.
Implied volatility Mover
Boston Scientific (BSX) loses 14 cents to $5.55 and options volume on the medical device-maker is 2X the daily average, being driven by Oct 6 call buyers. A multi-exchange sweep of 4,552 traded for 6 cents when the market was 4 to 6 cents. Another 2,057 BSX Oct 6 calls traded at an average of 4.7 cents when the market was 2 to 4 cents. Volume is now 7,308 against 2,901 in open interest. Implied volatility in BSX options is moving as well, up 13 percent to 55.5 ahead of earnings. The company is due to report earnings the morning of Oct 20 and the day before October expiration Friday.
