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Sentiment

Stock market averages are little changed on mixed economic news and hopes for the Eurozone Tuesday. Domestic economic data released early wasn’t bullish. Durable Goods fell 4 percent in January and 2.6 percent more than expected. Meanwhile, the Case Shiller Index of home prices fell another 3 percent and indicates that prices are at their worst levels since the housing crisis began. Housing recovery? Yet Consumer Confidence is improving. According to the Conference Board, its index of sentiment jumped to 70.8 in February, from 61.5 last month and much better than the 60.5 the month before. The mixed data failed to stir up a meaningful reaction and stock market averages once again fell into the familiar pattern of mixed and narrow trading through midday. Yet, the euro has moved back to 1.345 against the buck ahead of the tomorrows refinancing operations to add liquidity to European banks. Optimism for the Euro might be offering some stability and driving the steady trading on Wall Street. The Dow Jones Industrial Average is up 14 points and the tech-heavy NASDAQ gained 12.8 points. CBOE Volatility Index (.VIX) gained .05 to 18.24 amid light volume in the options market. 6.3 million calls and 5 million puts traded across the exchanges so far.

Bullish Flow

Banco Santander (STD) is up a penny to $8.40 and morning trades on the Spanish bank include a multi-exchange sweep of 4,045 Mar 9 calls for 10 cents when the market was 5 to 10 cents. 4,574 now traded against 8,138 in open interest and possibly bullish trading ahead of EU’s second LTRO program tomorrow. The question seems to be the size of the LTRO. At the first refinancing operation in December, European banks borrowed up to 489 billion euros. Banks might ask for more this time, which could potentially give the market more liquidity. If demand for loans is significantly less than in December, perhaps European banking problems are not as bad as feared. In any event, European equity markets and banks, including STD, could potentially see volatility tomorrow as events unfold.

Micron (NASDAQ:MU) with relative strength and high options volume today after the company agreed to expand a NAND Flash Memory joint venture with Intel. Micron shares are up 40 cents to $8.96 Tuesday and at multi-month highs after a three-day 14.7 percent winning run higher. 32.4 million Micron shares traded, which is more than 3X the typical volume. Meanwhile, 40,000 calls and 9,600 puts traded on the chipmaker. The flow is scattered, with Mar 10, Jan 12.5 and Mar 9 calls at the top of the most actives. Levels of implied volatility in MU are moving up 5 percent to 49.5, as upside call buyers seem to be dominating the flow and looking for further gains in Micron in the weeks/months ahead. Earnings will come into play around Mar 21.

Bearish Flow

Nokia (NYSE:NOK) loses 8 cents to $5.36 and some investors are dialing in to Mar 6 calls on the stock today. Most of the volume is due to one multi-exchange sweep of 4160 contracts for 11 cents each, which is an opening buyer, according to ISEE data. 5,465 now traded. Meanwhile, 1000-lots of Apr and Jul 1 puts on NOK traded below the bid today. Overall, the flow looks bullish and comes despite a downgrade at Oppenheimer — to Underperform from Perform. Shares fell 6.2 percent yesterday, as investors showed little enthusiasm towards the company’s latest round of smartphones unveiled at an event in Barcelona.

Implied volatility Mover

Pre-earnings action in Staples (NASDAQ:SPLS) seems bullish. Shares are up 47 cents to $15.71 on volume of 3.3 million, which is 1.5X the typical share volume for the first hour. Meanwhile, 8,150 calls and 1,235 puts traded on the office supplies retailer. The flow includes a multi-exchange sweep of 1,200 Jun 17 calls for 55 cents, which is an opening buyer, according to ISEE data. 2,430 traded. Apr 16, Apr 17, and Jun 18 calls are seeing interest as well and levels of implied volatility in SPLS are moving up 7.5 percent to 35.5 ahead of the report, which is due out tomorrow morning. The average daily post-earnings move in the stock over the past four quarters is about 5 percent and includes a 15.4 percent slide on 5/18. The Mar 16 straddle is currently trading at $1.10 or roughly 7 percent of the spot price.

Source: Tuesday Options Recap