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Sentiment

Stock market averages traded higher through midday with help from economic data, but then moved in a tight range in the afternoon session. Data released early Thursday showed jobless claims falling by 14,000 to 351K last week, which was 4,000 more than expected. The NY Empire State Index surprised. The gauge of regional manufacturing activity rose to 20.2 in March. Economists were looking for 15.0. PPI was up .4 percent in Feb and .1 percent less than expected. Meanwhile, Philly Fed rose to 12.5 in March, from 10.2 and in-line with estimates.

At the end of the day, the data was somewhat better than expected and the Dow Jones Industrial Average continued its winning ways at the opening bell. Through midday, the Dow had captured new multi-year highs with help from a third day of solid gains in BofA (BAC) and JPMorgan (JPM). Gold, which was pummeled yesterday, is up $17 to $1660. Crude saw volatile morning action on reports the US and UK would release strategic reserves. US officials denied the talks and crude is now little changed on the day. But the Dow is up 38 points and the Nasdaq has added 14.5. CBOE Volatility Index (.VIX) slipped .23 to 15.08. Options volume is extremely heavy due to the expiration and high ex-dividend activity in a number of exchange-traded funds. 15.5 million calls and 7 million puts traded so far.

Bullish Flow

Intermune (ITMN) rallies $1.62 to $16.42 on heavy volume of 4.7 million shares after a German agency said Esbriet shows benefits in treating pulmonary fibrosis. Typical volume in the first hour is less than 350K shares. The stock is now up 32.6 percent in the past six days and options action seems to reflect expectations for additional gains in the weeks ahead. 8,410 calls and 3,854 puts traded in the biotech. Recent trades include an Apr 16 – 20 (1X2) call ratio spread, bought for 60 cents, 1200X and seems to be targeting a move to $20 (~21.8%) through the Apr expiration (5 weeks). Even after the six-day rally, ITMN remains nearly 68 percent below the highs seen in April of last year, when the stock fetched more than $51 per share.

ProShares Ultra S&P 500 (SSO) adds 12 cents to $57.47 and a Mar 56 – 57 put spread trades on the ETF for 22 cents, 1733X on ISE. Data indicate an opening buyer. The spread, which has traded 2600X total, has a breakeven at $56.78 (~1.7%) at the expiration and, since it’s a bearish play on a short ETF, seems to reflect expectations for market strength today and tomorrow.

Bearish Flow

Citi (C) adds 66 cents to $35.87 and has recovered 53.2 percent of the loss suffered Wednesday on the heels of the stress-test results Tuesday afternoon. Recent options trades on the bank include a spread, in which 22,000 Mar 35 puts were sold on the stock at a dime per contract to buy 15,000 Weekly (3/23) 35 puts for 43 cents. Looks like a roll and probably extending a bearish bet (or hedge) on Citi an additional week. Another noteworthy trade in Citi today is a 10,000-lot of Apr 38 calls for 53 cents on ISE. Data from the exchange indicate an opening customer buyer and, in contrast to the put spread, apprears to be a decidedly bullish play on the bank. Meanwhile, levels of implied volatility rose 6.5 percent to 35 amid high volume in Citi today. 24 million shares and 165K options traded in the name so far.

Implied Volatility Mover

Oracle (ORCL) adds 15 cents to $29.99 and implied volatility in the options on the software-maker is moving higher ahead of next week’s earnings release. The company is due to report March 20. 33,000 calls and 13,000 puts traded on the stock so far today. April 32 calls are the most actives. 10,670 traded. Mar 30 puts and calls, which are at-the-money heading into the expiration, are busy as well. Levels of implied volatility moved up 28 percent to 34.5 and the market on the Mar 30 straddle is 25 to 27 cents, or .9 percent of the spot. The contracts expire after tomorrow and before the earnings are released. ORCL shares tumbled 11.7 percent on 12/21 after earnings were last reported and, after the past four releases, have seen average daily moves of 5.4 percent.

Unusual Volume Movers

Bullish flow detected in Sequenom (SQNM), with 6835 calls trading, or 3x the recent avg daily call volume in the name.

Bullish flow detected in Hovnanian Enterprises (HOV), with 6440 calls trading, or 4x the recent avg daily call volume in the name.

Meanwhile, unusually high options volume is being in in Citi (C), BofA (BAC), and JP Morgan (JPM).

Source: Thursday Options Recap