Sentiment
Market action is mixed. The early news flow Monday painted a mixed picture and included monthly Retail Sales, which rose .8 percent in March and .5 percent more than expected. That was the good news. The bad news was the NY Empire State Index fell to only 6.6 in April, down from 20.2 last month and well below expectations for 17.5. Bears also found solace in the fact that the NAHB Homebuilder Sentiment Index fell to only 25 in April, from 28 in March and below estimates of 29. However, trading was mixed through midday despite the poor manufacturing and housing data. Citi helped lift the financials on earnings news. BofA and JP Morgan are among 25 Dow stocks moving higher and the industrial average is up 103 points. However, the tech-heavy NASDAQ is down 20. With 40 minutes left to trade, CBOE Volatility Index (.VIX) is up .16 to 19.71 and off session highs of 20.42. Trading in the options market seems to reflect a cautious underlying tone. 6.65 million puts and 6.1 million calls traded so far today, yielding a put-to-call ratio of 1.09 and on pace for the highest so far in 2012 - surpassing the 1.05 seen in Jan 24. Trading is mixed today and CBOE Volatility Index hit a high of 20.42, but is up just .08 to 19.63. Still, the relatively high P/C ratio seems to reflect a cautious underlying tone after this year's biggest weekly loss for market averages suffered last week and ahead of a flood of Q1 corporate earnings releases. Netflix (NFLX) loses $2.55 to $101.62 and it looks like one investor is tuning in to a May 115 - 130 call spread on the stock for $2.60, 9000X on NYSE-ARCA. Looks like a buyer-initiated the trade to open a new position. In other words, 9000 May 115 calls were bought on NFLX for $4.05 and 9,000 May 130 calls sold at $1.45, which creates a bullish spread with a breakeven at expiration at $117.60 (~25.7%). The spread has now traded 14000X. Bullish trading in Netflix comes ahead of an Apr 23 earnings release. Shares jumped 22 percent on 1/26 when earnings were last reported, but fell 35 percent on 10/25 the time before that. The top options trade on an uninspired day of trading Monday is in the SPDR Financial Fund (XLF) after 60,000 Apr 15 puts were sold on the ETF at 14 cents per contract. It's possibly a liquidating trade. Shares are up 4 cents to $15.16 and Apr 15 puts on XLF are 1.05 percent out-of-the-money with a -.36 delta and expiring at the end of this week. Citi is helping the sector today on the heels of its earnings report. Goldman reports tomorrow morning before a barrage of earnings reports are released Wed-Thu, and then again next week. Cisco (CSCO) is down 25 cents to $19.60 amid relative weakness in the big cap tech names Monday and recent options trades on the networking giant include an 18290-contract block of Jan 22 calls at 85 cents on CBOE. The market was 85 to 88 cents at the time. 22,940 now traded and the activity is possibly liquidating trades, as open interest in Jan 22 calls on Cisco is 60,923 contracts. Shares performed well in the first three months of the year and were notching new 52-week highs at the end of the first quarter. However, CSCO is down 7.2 percent month-to-date and the selling of Jan 22 calls might reflect diminishing expectations for a move beyond $22 (~12.2%) through Jan 2013. The company will report earnings on May 9.Bullish Flow
Bearish Flow
Implied volatility Mover
Cobalt Energy (CIE) is down $3.13 to $25.25 on high volume of 4.8 million shares after the Financial Times posted a negative article about the company yesterday (Spotlight Falls on Cobalt's Angola Partner). The company is responding to the article today and strongly refutes any allegations of wrongdoing. Still, the stock is under pressure and levels of implied volatility in the options are up after 8,810 puts and 6,000 calls traded on the ticker, which is 3X the daily average. The flow has been in smaller sizes. The top trade is a 900 lot of May 22.5 puts on the $1.05 bid. 1,380 traded. April 25 puts, May 25 calls, and May 27.5 calls are the most actives. CIE was the subject of bearish order flow last week ahead of the Financial Times story. 30-day at-the-money implied volatility is up another 13 percent to 74 Monday morning.
