Stock market averages are deep in the red on worries about the debt crisis. Sharp losses across European equity markets after bond yields rose in Spain and Italy set the table for morning weakness on Wall Street. The domestic news flow is light and includes just one sole report on Wholesale Inventories, which rose .9 percent in February. The data had no visible market impact and the volatility seems primarily due to worries about the impact from the debt crisis on the banking industry and global economic growth. Crude oil is down $1.5 to $101 per barrel, but gold caught a late-day safe-haven bid and is now up $17 to $1661 an ounce. The benchmark ten-year Bond is up 18/32nd and its yield has dipped back below 2 percent. CBOE Volatility Index (.VIX) gains 2.17 to 20.98 amid defensive trading in the options market, with 8.7 million calls and 8.6 million puts traded across the exchanges so far. With 90 minutes left to trade, the Dow Jones Industrial Average is down 208 points and 12 points off session lows. The Nasdaq gave up 55 points.
United Technologies (UTX) is off 90 cents to $79.33 and is among 24 Dow stocks trading lower midday, as market breadth turned negative in morning action and the industrial average fell for a fifth consecutive trading session. The Dow is now down 105 points and probing session lows. Options order flow in UTX seems somewhat bullish, however, as 11,000 calls and 1,500 puts traded on the stock so far. The top trade is a 3800-lot of Jan 80 calls for $6.10 per contract when the market was $5.90 to $6.15. 5,050 now traded against 3,974 in open interest. Apr 82.5, Apr 85, May 82.5, Jan 77.5 and Jan 82.5 calls on UTX are also seeing interest and some investors might be taking positions in call options on the view the 17-day 8.9 percent decline in the stock presents an opportunity for bullish trades in the name. Earnings come into play on Apr 24.
Intel (INTC) adds 7 cents to $27.83 and one investor apparently sells 18220 Apr 29 calls on the chipmaker for 17 cents to buy 40,000 July 31 calls for 29 cents. A separate block of 35,000 Apr 30 calls traded on the 6-cent bid and might be rolling out of Apr 29/30 calls and to the July 31s, which saw an increase in open interest this morning after 35000 were bought for 27 cents per contract on the ISE yesterday. Today’s 40000-lot will likely add to yesterday’s activity. Bullish trading in Intel comes ahead of an Apr 17 earnings release. Caris analysts are out with bullish commentary today, saying they expect strong Q1 results.
SiriusXM Radio (SIRI) sees serious call volume today, as one player rolled a position in 2013 calls to the 2014s. The Jan13 – Jan14 $2 call spread was sold at 15 cents, 43800X and 19 cents, 25000X. The Jan13 – Jan14 2.5 call spread was sold at 24 cents, 25000X. Another 25000 Jan 2.5 calls were sold at 43 cents. Looks like a roll of a position in Jan13 calls accumulated over many months to a new position in Jan14s, possibly part of an overwrite strategy. 222,000 calls and 1400 puts now traded on the stock. Although SIRI has bounced lower and higher over the past twelve months, the stock is at the same levels today as in May of last year. Today’s call writers might be looking for the stock to remain in a range around these levels through early-2014.
Implied Volatility Mover
CBOE Volatility Index (.VIX) jumps 1.93 to 20.74 to reclaim the 20 “psyche” level after an 8-day 34 percent surge. Spiking bond yields in Spain and Italy, along with sharp losses across European equity markets, are being blamed for today’s spike in risk perceptions. Trading is orderly in the VIX pit so far, but lopsided — as 278K calls and 115K puts traded in the product today. The top trade is an Apr 22 – May 23 call spread, sold at $1.55, 17000X, and possibly rolling out a position on concerns VIX might settle above 22 at the April expiration (7 days), but not above 23 at the May expiry (35 days).
Unusual Volume Movers
Bullish flow detected in Jaguar Mining (JAG), with 29122 calls trading, or 9x the recent average daily call volume in the name.
Bullish flow detected in Iamgold (IAG), with 22010 calls trading, or 18x the recent average daily call volume in the name.
Bearish activity detected in Synta Pharmaceuticals (SNTA), with 5512 puts trading, or 251x the recent average daily put volume in the name.