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Sentiment

Stocks are broadly higher late-Wednesday, with Apple Computer (NASDAQ:AAPL) and Boeing (NYSE:BA) giving the market averages a lift and the Federal Reserve's monetary policy meeting having relatively little market impact. Apple was in the spotlight late-Tuesday after the company delivered a blowout quarter and, after falling in 10 of 11 trading sessions, shares recaptured the $600 level. The stock is now up $50 and near $610.00. At the same time, Boeing (BA) has scored a 5.2 percent post-earnings gain and is the biggest winner in the Dow Jones Industrial Average. On the economic front, a report released early Wednesday showed Durable Goods down a larger-than-expected 4.2 percent in March (vs. -1.7 percent consensus). Later, there was a modest uptick in market volatility at 12:30 ET when the FOMC concluded its rate policy meeting and, as expected, left rates on hold for the foreseeable future. While officials did note a modest whiff of inflation, they claimed the pressures are likely to be short-lived and then basically rehashed the same outlook from the March meeting. While bonds and gold slipped a bit on diminishing hopes for further easing, the Dow was able to shake off any selling pressure and is now up 70 points. With thirty minutes left to trade, AAPL is helping to power a 64-point surge in the NASDAQ. CBOE Volatility Index (.VIX) is down 1.12 to 16.98 now that FOMC event risk has passed. Trading in the options is respectable and reflects the bullish underlying tone 7.9 million calls and 6.2 million puts traded so far.

Bullish Flow

Cisco Systems (NASDAQ:CSCO) is flat at $19.42 and a 28000-contract block of Jun 18 puts trades on the stock at 29 cents per contract on the International Securities Exchange. ISEE is reporting a closing put sale and 30-day ATM implied vols in CSCO are down 4.5 percent to 30. The trade might offset a position opened just yesterday, when 28,000 Jun 18 puts traded for 31 cents on ISE and data pointed to an opening buyer. Today's put seller might have had a change of heart after Juniper Networks saw a rally on earnings late-yesteday. Cisco is due to report on May 9.
Morgan Stanley (NYSE:MS) loses 22 cents to $17.18 and morning options trades on the investment bank included a May 19 - 21 call spread for 14 cents, 9500X. The position is possibly closing or an adjustment, as open interest is sufficient to cover in both contracts. If opening, the 1X2 is targeting a move to $21 through the May expiration, or a 22.1 percent surge in thee and a half weeks. MS reported a quarterly loss on 4/19. Shares are down 4.8 percent since that time and off 18.8 percent during the past month.

Bearish Flow

Gap Stores (NYSE:GPS) adds 47 cents to $27.66 and early options trades on the retailer include a May 24 - 26 put spread for 32 cents, 8500X on ISE. 10,000 were bought-to-open total, according to ISEE data and seems to be bearish trading, possibly a play on April same store sales numbers (5/3) and/or earnings (5/17).

Implied volatility Mover

Onyx Pharmaceuticals (NASDAQ:ONXX) sees a morning spike and rallies to 52-week highs on high volume of 5.7 million shares after Reuters ran a piece suggesting Bayer might be interested in the biotech. ONXXY is up $4 to $47.44 and options volume is running 33X the daily average, with heavy trading seen in the May puts and calls on the stock. The top trade is spread, in which the strategist sold 4,000 May 42 puts at 75 cents and bought 4,000 Jan 40 puts for $4.10, which might be a bet that shares will hold above $42 (~11.4%) through the May expiration (23 days) and then fall from that point forward through mid-Jan. It's perhaps clever way to hedge some of the recent gains in the stock. ONXX is up 25.9 percent month-to-date. Meanwhile, 30-day ATM implied volatility is moving up 6.5 percent to 51.5 amid the heavy trading in Onyx options Thursday.

Source: Wednesday Options Recap