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Unusual Option Activity

The Q's and SPY both had heavy volume and unusual activity that suggests a significant bearish undercurrent despite the end of day, slightly, bullish trend.

Looking at the 45 Put strike for both August and September on the Q's you'll note 187K contracts and on the SPY significant August put volume from the 109 down to the 103 strikes and in September 80K contracts on the 103 Put strike.  As I see it the volume is all buying, hinting to at worst significant bearish expectation.  So, if the Initial Claims data is worse than expected, a breakout to the downside for the markets is the likely trend.  On the other hand, if the news is better than expected, we'll see the markets push higher as the short calls NTM are covered with long stock.

With the extraordinary bearish sentiment, I'd wait until after the Initial claims data before considering any changes to current short-term positions.  As it stands the ITM short calls for August, could very well find themselves OTM.

Earnings data, for the most part, continued to follow this last earnings season trend of beating expectation with forward looking projections that bolster market sentiment.  Today TGT and DE were two that announced and although TGT had some weakness the markets took the conference call as a positive step and pushed its share value higher.  More oil inventory than expected push oil prices downward and Gold values closed above $1230.00 for the first time in weeks.

Summary:  Cautious as the markets will move based on Initial claims data.  There is certainly negative sentiment that is also validated with Put/Call ratios from the CBOE.
As options are set to expire this Saturday, expect that volatility will continue.

CTM trades:

All Short options ATM/ITM should be monitored to see if they can be closed at a profit in the next 2 days.  AAPL, AMZN, IBM, CREE, GLD are all either NTM or ITM with short call positions and RIMM is ITM with a Short Put.


Disclosure: Open Positioins are noted in the Body of the Blog.