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Sentiment

Stock market averages are probing session lows heading into the final 90 minutes of trading for 2011. With no economic data to guide markets, trading turned mixed in uninspired action through midday. Gold was shining after a six-day losing skid and is up $25 to $1566 an ounce. The yellow metal is now up more than $40 from the lows seen yesterday morning. Crude oil is little changed at $99.55 per barrel. Meanwhile, players are making final year-end portfolio adjustments before portfolios are scrutinized to judge 2011 relative performance. The S&P 500 is basically flat on the year and pinned to a 200-day moving average. Meanwhile, the Dow Jones Industrial Average has lost 55 points on the day, but up 653 points year-to-date. The NASDAQ dipped 4 points today and gave up about 40 points in 2011. CBOE Volatility Index (.VIX) edged up .54 to 23.19 and well above the levels seen a year ago, when the “fear gauge” finished 2010 at 17.75. Meanwhile, it was another record year for options volume – driven by institutional flow into macro products – SPY, XLF, GLD, etc. Volume is light today, however, with 3.7 million calls and 2.9 million puts traded so far. Happy New Year everyone!

Bullish Flow

Call options on the SPDR Financials (NYSEARCA:XLF) are seeing interest. 126,000 contracts traded on the ETF so far, which is about 1.5X the typical volume for midday and compares to put volume of 42,000 contracts. Recent trades include a buyer of 50,000 Jan $14 calls on the XLF for 7 cents per contract on AMEX. Separately, a 46,300-block of Jan $13 calls was bought on the ETF for 38 cents per contract on ISE. Data from the exchange indicate an opening position. 62,320 of these at-the-money calls have now changed hands, as some investors seem to be bracing for a rebound in the banking sector in early-2012. XLF underperformed in 2011 and is down 18.4 percent year-to-date.

Bearish Flow

Intel (NASDAQ:INTC) loses a dime to $24.45 and a Jul 17 – 23 put spread is apparently bought on the chipmaker for $1.26, 10200X on PHLX. It’s also traded about 1200X on ISE. 11,900 total and, while open interest is sufficient to cover, data hints at opening activity. If so, the flow possibly adds to positions opened earlier this month and shortly after the company lowered revenue guidance. For example, on 12/16, 10000 July 17 – 23 put spreads were bought for $1.59 (see 12/13 and 12/16 color). Bearish tarding on the world’s largest chipmaker might be a bet that shares, which are up more than 20 percent since August, will see increasing volatility in early-2012. The company will release earnings on the afternoon of January 19.

Implied Volatility Mover

On one of the slowest days of the 2011, Leap Wireless (LEAP) options are having their most active day of the year as shares leap 15% to $9.75 on a JPM note about potential M&A targets after the collapse of the T-mobile/ATT (NYSE:T) deal. PCS (PCS) was also mentioned but Leap is in the lead with 22K calls trading and the Jan 9 calls leading the most actives trading from 61 cents to a high of 1.48 as shares approached $10 this afternoon. IV in the LEAP Jan 10 strike is up nearly 23 points to 105%.

Unusual Options Movers

Bullish flow detected in GTX Inc (NASDAQ:GTXI), with 2019 calls trading, or 16x the recent average daily call volume in the name.

Bearish activity detected in Hasbro (NASDAQ:HAS), with 4001 puts trading, or 5x the recent average daily put volume in the name.

Bullish flow detected in Hudson City Bancorp (NASDAQ:HCBK), with 2489 calls trading, or 4x the recent average daily call volume in the name.

Meanwhile, unusually high options volume is being seen in Pharmasset (VRUS), Assured Guaranty (NYSE:AGO), and News Corp (NASDAQ:NWSA).

Source: Friday Options Recap