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Sentiment

The bearish underlying tone continued late Friday. In the absence of economic data, trading was steady early and the S&P 500 tried to break its five-day losing skid. The Street was abuzz about the much-anticipated Facebook (FB) IPO, as it was delayed 30 minutes and then the stock quickly gave up an initial 18% gain, fell back to test its offering price of $38 per share by about noon ET. The lackluster reception to the offering seemed to reinforce the idea that market conditions, well, they stink right now. The Dow Jones Industrial Average fell to session lows. The concerns are not much changed since yesterday. As one trader put it, “stocks are ridiculously cheap” and the “Europe situation is getting very ugly." Indeed, players won’t stick their necks out too far for fear of the next debt debacle. A $1.02 loss in crude, to $91.92 per barrel, did little to help ease concerns about the global economy. The yield on the ten-year Treasury Note is at record lows and gold is up $15 to $1,590 on flight-to-safety. The Dow is down 69 points and near session lows. The Nasdaq lost 27 points. CBOE Volatility Index (.VIX) erased morning losses and is up .27 to 24.76, amid heavy expiration-related activity in the options market. With a little more than an hour left to trade, 8 million calls and 10 million puts traded across the exchanges thus far.

Bullish Flow

J.C. Penney (JCP), which was pounded for a 20% loss Wednesday and lost another 3% yesterday, is up 36 cents to $26.30 and one player opens a bullish longer-term options position on the retailer today - selling 5,000 Jan14 23 puts at $4.55 to buy 10,000 Jan14 30 - 37 call spreads for $2.15. 25 cents was collected on the three-way and seems to reflect confidence that shares will have recovered the two-day post-earnings slide by January 2014.

Medtronic (MDT) is flat at $37.07 and morning trades on the medical device-maker include a multi-exchange sweep of 4932 Jun 41 calls for 12 cents per contract. ISEE is reporting an opening firm buyer. June 39 calls are also seeing interest. 9,400 calls and 1,850 now traded ahead of a May 22 earnings report. Implied volatility, which rose 12% to 27 yesterday after the stock fell 3%, has eased back to 26.

Bearish Flow

Itau Unibanco (ITUB) adds 19 cents to $13.57 and an early options trades on the San Paulo-bank is a 3,950-lot of Jun 11 puts for 15 cents per contract. The market was 10 to 15 cents. 6,738 now traded against 6,615 in open interest. Shares have plummeted 37% over the past two months and hit 52-week lows of $13.29 yesterday. The flow might be closing, but seems to reflect the view that a move beyond $11 through mid-June is a possibility.

Implied Volatility Mover

Nasdaq OMX (NDAQ) option volume and implied volatility spiked this morning when it became clear that the exchange was having trouble opening Facebook for trading on-time at 11 a.m. While 643 contracts had traded in the first 90 minutes of the day, between 11 a.m. and noon we saw 6,700 contracts trade, and implied volatility in NDAQ options spike more than 30% to 38%. Heading into the close NDAQ volume was nearly 18x normal, with 10,000 puts and 2700 calls trading on the day and shares down about 3% near 22.29. May 23 puts that expire in a few minutes lead the most actives with 4,700 and an average price of 26 cents, but buyers have also scooped up June 21 and 23 strike puts, causing the 25 delta put-call skew to steepen by nearly 8 points.

Unusual Volume Movers

Bullish flow detected in Ubiquiti Networks (UBNT), with 2,258 calls trading, or 3x the recent average daily call volume in the name.

Bearish activity detected in Fortinet (FTNT), with 4,994 puts trading, or 2x the recent average daily put volume in the name.

Bullish flow detected in Urban Outfitters (URBN), with 5,706 calls trading, or 5x the recent average daily call volume in the name.

High options volume is being seen in LinkedIn (LNKD), JPMorgan (JPM) and SPDR Financial Fund (XLF).

Source: Friday Options Recap