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Sentiment

Stock market averages are probing session lows in the final hour of trading Monday. The only economic stat of the day was released at 10:00 ET and showed the NAHB Home builder Sentiment Index up to 21 in December, from 19 the month before and also better than the 19 that was expected. Most of the focus remains on events overseas, however. South Korea’s KOSPI lost 3.4 percent after the death of North Korean leader Kim Jong II raised concerns about a transition of power within the regime. Meanwhile, EU officials announced plans to provide $150 billion in loans to the IMF, which might have been less than expected because stock market averages fell to session lows shortly after the news hit the wires. BofA (NYSE:BAC) is down 4.8 percent and falling below $5 per share. JP Morgan is down 4.1 percent and the second biggest losers in the Dow behind BofA. The Industrial average is now off 102 points and the tech-heavy NASDAQ gave up 31 points. CBOE Volatility Index (.VIX) added .66 points to 24.95. Trading in the options market is running a bit higher than usual, with 8.9 million calls and 6 million puts traded across the exchanges so far.

Bullish Flow

Research In Motion’s (RIMM) woes continue. After falling 11.2 percent to multi-year lows of $13.44 Friday, shares are down another 8 cents to $13.36 amid active trading in the options on the Blackberry-maker. 34,000 calls and 12,000 puts traded in RIM during the first forty-five minutes of Monday’s session. The top trades look like a possible contrary play, as one strategist bought 5,800 Mar 17.5 calls on the stock and 5,800 Jun 19 calls, paying $1.60 for the call “stupid” spread and possibly closing a position, as both contracts are falling further out-of-the-money and open interest is sufficient to cover.

Bearish Flow

BofA loses 24 cents to $4.96 and is dipping below $5 per share for the first time since March 2009. The top options trades on the bank today: Feb 4 - Jan 6 strangle at 20 cents, 24000X. It might be a closing trade and/or perhaps a bet that shares will hold around these levels (between $4 and $6), in the weeks ahead. BofA and other banks are under pressure today on concerns about the global economy and bank exposure to sovereign debt.

Implied volatility Mover

Lender Processing Services (NYSE:LPS) has added 27 cents to $14.27 and attempting to stabilize after the 17.5 percent loss suffered Friday after the Nevada AG filed a lawsuit against the company for customer fraud. Early options trades on the stock include a 6000-contract block of Jun 21 calls bought for 75 cents per contract. Looks opening. 6,486 now traded against 10 contracts in open interest. Implied vols are up another 2 percent to 70.

Source: Monday Options Recap