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Sentiment

Stock market averages fell Wednesday on disappointing economic data and weakness in crude oil. A 2.65 percent loss in Shanghai’s Composite Index seemed to reflect the recent concern that China, the world’s second largest economy, is slowing. Declines were seen across Eurozone equity markets as well, with Spain’s IBEX losing 1.9 percent. Crude oil is under pressure on worry about the economy and on reports French officials are in talks with the US about releasing strategic reserves. Crude oil is off $1.83 to $105.50 per barrel. Gold lost $25 to $1160 an ounce. The day’s domestic news did little to reassure investors, as a report on February durable goods printed at 2.2 percent. Economists were expecting an increase of 2.8 percent. The Dow Jones Industrial Average opened lower on the data and has failed to stage any meaningful rally attempts. The Dow is now down 98 points and 31 points off session lows. The NASDAQ gave back 20. CBOE Volatility Index (.VIX) is up .71 to 16.30 amid more cautious trading in the options market. 6.9 million calls and 6.9 million puts traded across the exchanges so far.

Bullish Flow

BofA (NYSE:BAC) adds 8 cents to $9.68 and is bucking the bearish trend amid strength in the financials today, but volume is 162 million BAC shares and well below the typical volume for the bank (which is about 215 million through midday). Options volume is also light, but lopsided, as call volume is outpacing put activity by a margin of almost three-to-one. 243K calls and 89K puts traded on the bank so far. The top trade is a Jun 11 - 12 call spread for 16 cents, 25000X on ISE. Data from the exchange is reporting an opening buyer for a customer account. If so, it's probably a bet that BofA will see another strong quarter after the 73.9 percent year-to-date surge seen so far during Q1.
Zoltek (NASDAQ:ZOLT) is a big mover today after Needham raised the stock to Hold from Underperform. Shares of the St. Louis, MO carbon fiber developer are up $1.40, or 13.7 percent, to $11.59 on volume of 890K shares. Typical volume in the first two hours of trading is about 120K. Meanwhile, options volume is running 6X the daily average. 2,730 calls and 40 puts traded in ZOLT so far. May 12.5 calls, which are 7.9 percent out-of-the-money and expiring in 51 days, are the most actives. 1,356 traded (78 percent Ask). April 12.5 and Jul 15 calls are the next most actives, as some players in the options market appear to be positioning for a rebound in the stock. ZOLT hit a 52-week high of $15.01 intraday on 2/6 before falling 32.2 percent to a low of $10.09 on 3/22. The company announced today that it has a joint venture with Magna International to build car parts made from carbon fibers.

Bearish Flow

SPDR Healthcare Fund (NYSEARCA:XLV) touched a new 52-week high today, but erased early gains and is now down 21 cents to $37.12. Some investors seem to be anticipating additional weakness in shares of the fund, as options volume is 2.5X the daily average and being driven by opening downside put buyers. September 37 puts are the most actives after 20,970 traded. The largest block is 13,856 contracts for $1.69 on ISE and an opening buyer, according to data from the exchange. April 36 and 37 puts are seeing interest as well and levels of implied volatility in XLV options is up 7 percent to 14. Shares have gained 7 percent in the first quarter and underperforming the S&P, but there hasn't been much volatility during the advance. The 120-day statistical volatility on XLV is 16.2 percent -- compared to 19.2 percent for the S&P.

Implied Volatility Mover

Jos A Bank (NASDAQ:JOSB) loses $4.33 to $50.15 after posting earnings slightly below expectations and offering cautious guidance for the first quarter. Recent options trades on the Hampstead, MD apparel retailer include a 10,000-contract block of Apr 50 calls at $2.15 per contract when the market was $2.05 to $2.30 and is possibly a call writer. It’s tied to 560K shares at $50.45 and will create the largest block of open interest in the name. Implied volatility is down 7 percent to 32.5 and the call write might express the view that the stock will hold near $50 or slightly below through the April expiration, which is in 23 days.
Source: Wednesday Options Recap