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Sentiment

Stock market averages are lower Monday on disappointing economic news from Asia and some pre-earnings jitters ahead of Alcoa’s (AA) results. Japan’s Nikkei slipped 1.4 percent after a report showed a sharp drop in the nation’s machinery orders. At the same time, Hong Kong’s Hang Seng suffered a 1.9 percent decline on a report that showed slowing inflation – yet another sign Asia’s largest economy is slowing. In Europe, investors remain on edge as Spanish bond yields ticked above 7 percent despite recent moves by the European Central Bank to stem the crisis. In the US, the economic calendar is light during the first half of the week, but Alcoa unofficially kicks off the earnings reporting season after the closing bell. However, the deluge of quarterly reports won’t begin until the middle of next week. Still, JPMorgan’s (JPM) results are likely to get some attention Friday morning as investors attempt to gauge the impact of the bank’s trading losses on future earnings. Today, volumes are light, but the underlying tone is cautious, with a wait-and-see feel ahead of the second quarter earnings reporting season. The Dow Jones Industrial Average is down 66 points, and the tech-heavy NASDAQ lost 14.2. CBOE Volatility Index (.VIX) is up 1.10 to 18.20. Only 4 million calls and 3.6 million puts traded across the 10 exchanges so far.

Bullish Flow

Focus Media (FMCN) loses 26 cents to $21.99 and a Jan 17.5 - 30 risk reversal trades on the stock at 55 cents, 10700x. It appears that puts sold to buy calls and possibly closing a position opened a few weeks ago when a three-way spread was initiated on the Chinese media company. At that time, calls were sold to buy a Jan 12.7 - 17.5 put spread, 15000x. Shares are up about 3 percent since that time, and if closing, today's bullish combo might reflect diminishing concerns about a decline in the share price during the second half of 2012.

Bearish Flow

LinkedIn (LNKD) shares are under pressure in active trading and implied volatility in the options on the stock is ticking higher on a July 6 FINS Technology report that "Facebook To Launch Jobs Board." LinkedIn has managed to generate high profits growth by carving out a niche as a professional social network in a increasingly crowded social media world. Now Facebook is moving into the arena, and is set to launch a job board in August, according to the article. FINS cites "people familiar with the matter" as the source of the information.

LNKD is down $6.12 to $102.74 in active trading of 1.8 million shares. 6,375 calls and 7,510 puts traded on the stock so far, which is about double the expected volume. Weekly 100 puts are the most actives. More than 2,000 traded at an average price of 96 cents. The contract is 2.8 percent OTM and expires on Friday the 13th. Aug 125 calls, Jul 105 puts, Jul 105 calls and Jul 100 puts are the next most actives and 30-day ATM implied volatility in LNKD is moving up 18 percent to 54, but still only in the 25th percentile of the 2012 range (83 and 40.5). Earnings are expected early-August.

Implied Volatility Mover

The ten most active options contracts today are in the SPDR 500 Trust (SPY). The eight most actives are puts on the exchange-traded fund. SPY is off 42 cents to $135.07 on very light volume of 70 million shares. The projected volume of 96 million is about 60 percent of the normal. In fact, today's share volume is only in the 1 percentile of daily volume for the Spiders during the past year. 310,000 calls traded on the product, or 39 percent the expected. 725,000 SPY puts have changed hands, only 63 percent of anticipated. August 135 puts, which are at-the-money, are the most actives. 45,354 traded. The next most actively traded options contracts today (ranked by volume) are SPY Jul 130 puts, Jul 132 puts, Weekly 135 puts, Jul 135 puts, Jul 133 puts. Aug 128 puts, and July 127 puts. Implied volatility in SPY is up 6 percent to 15.5, but still below the 30-day actual volatility of 17.5.

Unusual Volume Movers

Bearish activity detected in Allergan Inc. (AGN) with 2460 puts trading, or 8x the recent average daily put volume in the name. Shares near $92.21 (-1.49) with ATMIV lifting by 3.54 point and 81% of today's put premium trading offer side.

Bullish flow detected in Juniper Networks Inc. (JNPR) with 8002 calls trading, or 3x the recent average daily call volume in the name. Shares near $15.18 (-0.4) with ATMIV lifting by 4.29 point and 55% of today's call premium trading offer side.

Bullish flow detected in Shaw Group (SHAW) with 6432 calls trading, or 6x the recent average daily call volume in the name. Shares near $27.73 (-0.4) with ATMIV lifting by 7.81 point and 66% of today's call premium trading offer side.

High options volume is being seen in Alcoa (AA), Merck (MRK), and Blackstone (BX).

Source: Monday Options Recap