Pages



• OptionsU Blog Homepage
  Options University Homepage
  Contact Us

• Categories

  • Option Trading Articles
  • Market Snapshots
  • Beginner Options Trading
  • Intermediate Options Trading
  • Advanced Options Trading
  • Options Q&A's
  • Video Updates

• Archives

  • February 2012
  • January 2012
  • October 2011
  • September 2011
  • August 2011
  • July 2011
  • June 2011
  • May 2011
  • April 2011
  • October 2009
  • September 2009
  • May 2009
  • April 2009
  • March 2009
  • February 2009
  • January 2009
  • December 2008
  • November 2008
  • October 2008
  • September 2008
  • August 2008
  • July 2008
  • June 2008
  • May 2008
  • February 2008
  • January 2008
  • December 2007
  • November 2007
  • October 2007
  • September 2007

• Recent Posts

  • Volatility Perks Up, Despite Strong US Economic Data
  • Stronger Stocks Pull Volatility Down to 8 Month Low
  • US Equity Markets Show Positive Earnings
  • Strong Earning and Fed Sink Volatility
  • Implied Volatility in January
  • US Remains Resilient, but for How Long?
  • Volatility Softens as 2012 Begins
  • Employment Data Fails to Push Stocks Higher
  • Stocks Rally After BOE Bond Purchase Announcement
  • Volatility Softens Despite Continued Downward Pressure on Equities

Press Release

• Timely Intensive Options Trading Workshop With Renowned Experts Presented by Options University
  Options University Reports Recent Market Volatility Causes Boom in Options Training
  Recent Market Plunge is the Most Severe Drop Since 9/11 - Investors Can Protect Their Investments and Profit in an Unstable Market
  Options Mastery Series Re-released March 1st Due to High Demand
  New Options Trading Video Library, The Options Mastery Series, Sells Out In One Week - Limited Re-release in March 2007
  Investors Profit Despite Stock Market Volatility With Options Trading
  SEC’s Proposed Drastic Rule Change Will Free Up More Money for Investors
  NASDAQ’s Entry into the Options Market Favors Individual Investors
  Major Recent Nasdaq News Release:
  Trend Alert: Aging Baby Boomers Turn to Options Trading (Risky or Not)

Our Blog Partners



• 
• 
• 

Bookmarking

Add to Onlywire

Feeds

US equities were deep in the red on the final day of trading for the third quarter 2011. The domestic economic news held some good news after the Chicago PMI rose to 60.4 in September, up from 56.5 in August and much better than the 54.0 that was expected. At the same time, University of Michigan Consumer Sentiment index improved to 59.4, from 57.8 in mid-September and better than the 57.5 that was expected.

The stage was set for morning weakness on Wall Street after disagreement among EU officials about plans to solve the debt crisis weighed on Euro zone equity markets. Germany’s DAX paced the decline with a 2.5 percent loss. The euro gave up 1.3 percent on the buck and economic uncertainty has heightened risk perceptions heading into the historically volatile month of October. A disappointing reading on personal incomes, which fell .1 percent in August and .2 percent more than expected, also weighed on morning trading. The report also showed a .2 percent increase in spending, which was in-line with expectations.

The CBOE Volatility Index (.VIX) is up 3.7 to 42.50. VIX Options action is defensive, but volume is light. 6 million calls and 6.7 million puts traded across the US exchanges. The volatility index remains on the higher end of the current range.

 

In bearish flow, Eastman Kodak (EK), the 131-year old camera company and once a member of the Dow Jones Industrial Average is reeling Friday afternoon after Bloomberg reported the company is exploring options , including bankruptcy. EK was recently down $1.12 to just 57 cents per share. Oct 1 puts are the most actives on the stock. 4,260 traded. November 1 and October .5 puts are seeing interest as well. 16,000 puts and 8,820 calls now traded in Kodak. EK has been under pressure throughout the week and was the subject of bearish options order Flow Monday when the stock was at $1.81 per share.

The biggest implied volatility mover was Harbin Electric (HRBN).  The stock was up $1.78 to $20.98 and implied volatility in the options on the stock is falling 34 percent to 96 after the company filed a10K and started mailing proxy materials for a special meeting for shareholders to vote on the $24 per share cash LBO. 20,000 calls and 26,000 puts traded on the Chinese electrical equipment company. The top trade is a 9000-block of Oct 18 puts at $1.40 on ISE and was sold-to-open by a customer, according to ISEE data. 10,485 now traded, probably on the view that the stock will hold above $18 through the October expiration (21 days). Shares hit a low of $17.63 in volatile trading Wednesday on a negative blog post but have rebounded for a 19 percent gain since that time.

 

The geopolitical market environment is creating solid historical volatility, as most major average are in a solid trading range.  The S&P 500 Index is bouncing around in a 9% range, making it difficult for bulls and bears to make money.  Better than expected housing price data along with inline confidence data, allowed the US markets to rally on the heels of Europe’s short squeeze.

In economic news, U.S. home prices rose in July but remain down from last year, according to Standard & Poor’s Case-Shiller home-price indexes.  Home prices rose in July from June in 17 of the 20 major U.S. metropolitan markets included in the monthly survey.  Overall, the 20-city index rose 0.9% in July from June. Adjusting for seasonal factors, however, the index was flat. A smaller index of 10 major cities also rose 0.9% from June but fell 0.1% when seasonal factors were included. Year-to-year, unadjusted July prices fell 3.7% for the 10 major markets while the 20-city index was down 4.1%.

Consumer confidence fell short even of economists’ expectations. The present situation index, a gauge of consumers’ assessment of current economic conditions, fell further to 32.5 from a revised 34.3, originally put at 33.3. The Conference Board’s confidence index, which is on a 100-point scale, hit its most recent peak in February at 72.0.

Volatility fell nearly 3%, back into the lower end of the current trading range for the volatility index.  The VIX moved down to 35.5%, after reaching a recent high near 42%.  A continuation of the current equity market rally will likely lead to a test of the 20-day moving average near 35%.  A break of this level will likely test support near the 50-day moving average near 32%.  A market rally will co-inside with a breakdown of the VIX below the 30% level, which will likely be the tell that investors are less fearful of the current market environment.

 

Starbuck’s (SBUX) moved higher and the top options trade on the stock was a 3560-contract block of Oct 40 puts at $1.59 on ISE. Sentiment data indicate a customer sold-to-open. 5,035 now traded against 2,540 in open interest. SBUX notched a 52-week high of $42 intraday on Sep 20, but gave up the gains and finished the day with a loss. Shares fell an additional 6.1 percent over the next two days, to $38.6, but are on a three-day 4.7 percent run higher since that time. The stock is not far from a resistance level around $41, which coincides with highs seen in June and July. Meanwhile, implied volatility on the stock is down 9.5 percent to 40, compared to a 52-week high and low of 54 and 22.

RIM rallied as the  Blackberry-maker are seeing brisk trading Tuesday. Shares gained and are up 12.4 percent from the intraday 52-week low of $20.41 set Thursday. Options volume in RIM on the open was 63,000 calls and 19,000 puts. Meanwhile, implied volatility in options on RIMM is up 10 percent to 71 amid talk Carl Icahn has taken a stake in the company.

 

US equities consolidated after Wednesday’s and Thursday’s market drubbing.  Investors instead focused on exiting precious metals as gold sold off more than 100 dollars an ounce and silver prices plunged losing more than 25% over the last two trading days.  The only true safe haven seems to have been the US treasury market which witness a huge rally in which the 10-year note yield fell to 1.71 the lowest level seen since 1971.

The VIX volatility index remained strong, moving higher by more than 35% during the past week.  The VIX edged higher, but still remains in a large range between 48% and 31%.  Recent resistance is seen near the 42% level, while support is seen near the 20-day moving average at 35%.  The crude oil volatility index also saw a solid rally during the week.  The OVX rallied nearly 30% this week to 54.4, with support near the 40% level and resistance near 65%.

 

 

Banking stocks have lost significant value during the past week, but Friday witness a dead cat bounce.JP Morgan (JPM) was higher and attempting to stabilize after a 5-day 13.4 percent slide that sent shares to new 52-week lows of $28.53 intraday yesterday. Sentiment in the options market seems a bit less bearish. 21,000 calls and 15,000 puts traded on the bank. The top trade is a 5,000-contract block of March 38 calls at 85 cents on ISE when the market was 81 to 85 cents. Sentiment data indicate a firm opened a new position. Meanwhile, implied volatility in option on the bank has eased about 4 percent, but remains elevated at 60 (52-week range is 17.5 and 73.5).

The top equity options trade so far today was in BofA (BAC). After touching $6 even and closing at a new 52-week low of $6.06 Thursday, shares are up slightly Friday. In options action, a 40,000-contract block of Feb 3 puts was bought on the bank at 24 cents per contract. It was part of a 1X2. The strategist also sold 20,000 Feb 9 puts at $3.03.

There might be some positive news for US equities, as China’s tightening may finally be over amid worries that the U.S. and Europe are sinking back into recession. Many don’t expect any pre-emptive easing.  Unlike its quick move to stimulate its economy after the global financial crisis hit in 2008, Beijing has stood pat despite the sluggish growth in US and Europe. Premier Wen Jiabao has signaled that no easing is in the cards until it’s clear that China’s bubbly property sector has been reined in.

Volume and implied volatility are higher in iShares Silver Fund (SLV), as the metals continue to suffer heavy losses Friday. Gold is down $100 to $1,648.5 an ounce and copper lost 20 cents to $3.28. SLV is trading down $5.10 to $29.82 and today’s options volume in the ETF is about 400K calls and 330K puts. Players are jockeying for position ahead of the white metal’s next short-term move.

 

The VIX volatility index soared, as asset prices for all products with the exception of US Treasuries were hammered. Crude oil prices fell below $80 dollars a barrel, while gold and silver saw enormous slides. US equity prices were down more than 3.0%, on the back of Wednesday’s powerful selloff.

The selloff is on the heels of the FOMC downgrading their outlook of the US economy after Wednesday’s meeting. Despite adding additional liquidity in the form of the “twist”, markets were not impressed and instead focused on global growth. The downgrade by the Fed of inflation expectations hit gold and silver prices which collapsed. Silver dropped more than 10% while gold was down nearly $60 dollar per ounce.

The FOMC announce Operation Twist in which the Federal Reserve will sell 400 billion dollars worth of 3 year treasuries and purchase the same amount of 6 to 30 year US treasuries. The amount of twisting is slightly more than market participants expected at 350 billion of treasuries. 29% of the bonds purchased will be 20-30 year tenors in an effort to drive down the longer end of the treasury curve. There are several significant similarities between Operation Twist and the Fed’s QE programs and one key distinction.

In Wednesday trading yields on 10-year Treasury notes fell to 1.77%, their lowest level on record going back to 1977, which was one effect the Fed was hoping to have. The Fed’s move to keep more of its portfolio in mortgage bonds should also pull mortgage rates down as well.
In the US, Initial jobless claims dropped by 9,000 to 423,000 during the week ended Sept. 17, according to the Labor Department. Claims filed in the previous week were revised to 432,000 from an originally reported 428,000. Economists had forecast claims would decline by 8,000 the week ending September 17. The four-week moving average of new claims, rose by 500 to 421,000.
Additionally, the preliminary HSBC China Manufacturing Purchasing Managers Index fell to 49.4 in September from a final reading of 49.9 in August, according to HSBC Holdings PLC. The fall in the PMI could reignite some concerns over a sharp economic slowdown in China, due to weakening global demand for Chinese goods and various tightening measures at home. The positive news from this data is that the PBOC could potentially begin to loosen policy driving up commodities and equities.
The VIX volatility index more higher by nearly 14%, and is testing levels seen in August. The 48% level has historically been resilient, and has only been breached during the financial crises. The 31% level has been strong support during the past 2 months. A break above 48% would likely see a test of volatility toward 60%.

 

After the bell, H-P officially named Meg Whitman as CEO and president, effective immediately.

 

Equity markets were mixed as the Federal Reserve embarked upon a 2-day monetary policy meeting which the market expects to yield additional easing and liquidity. The move in stocks came despite worse than expected housing data. With an eye on Europe, and plans on how to fund Greece’s debt, investors bid up stocks head of the FOMC announcement. The IMF announcement reflecting stagnating growth did little to help US equities.

The IMF’s flagship report, the World Economic Outlook, warned that the U.S. and European economies faced recession unless governments around the world took concerted actions to revamp economic policies. For the U.S., that means less dependence on debt; for the euro zone, a resolution of the sovereign-debt crisis; for China, increased reliance on domestic demand.

US housing starts decreased 5.0% from a month earlier an annual rate of 571,000, according to the Commerce Department. A third of the dropped came from a decline in Northeastern states. Compared with the same month a year earlier, new-home construction in August was down 5.8%.

New building permits, a gauge of future construction, rose 3.2% from a month earlier to an annual rate of 620,000, the highest level since last December. Economists surveyed expected housing starts would fall by 2.3% to an annual rate of 590,000. Permits had been projected to fall 1.8% to an annual rate of 590,000. Construction of single-family homes, which made up 73% of all starts, fell by 1.4% from a month earlier.

Builders have also had problems attaining financing to start projects. On Monday, the National Association of Home Builders said its index of builders’ confidence fell to 14 in September, down from 15 a month earlier.

Mining companies were the bright spot for the equity markets with Novagold (NG) seeing a second day of high options volume. Yesterday’s flow was driven by a massive put spread, which resulted in 40K in new open interest in Dec 7 puts on the Vancouver-based gold miner. The flow was decidedly different. options volume is 16K calls and 980 puts. Gold was up $29 to $1805.70 an ounce.

After the bell, ORCL reported earnings of 48 cents a share ex items, up 14% vs. a year earlier and 2 cents above Wall Street expectations. Revenue climbed 11% to $8.37 billion, just above Wall Street forecasts. Both were the smallest gains in 6 quarters. New software license revenue climbed 17%. But hardware systems products revenue fell 5%.
The VIX volatility index consolidated and continues to trading in a range between 48% abd 39.5%. Support is seen near the lower horizontal trend line and the 50-day moving average at 30.50. A break would likely lead back to the 200-day moving average near 21.00. Resistance on the index is seen near 42%.

US markets were able to extend their winning streak to 5 trading sessions, as the retail and technology sectors continued to drive the markets higher.  All eyes continue to focus on this weekend’s ECOFIN meeting.  The focus of the meeting will be the EFSF and discussions over the  conditionality that countries like Finland and Holland are demanding for approval of the facility.  Any major announcements are unlikely but would not rule of the possibility of a resolution over the Finland’s request for collateral in the second Greek aid package.

Volume and volatility decreased during the week, as price action moved to the high end of the current trading range.  Economic activity throughout the week was on the soft side, but consumer sentiment increased along with  equity prices.

The University of Michigan’s preliminary reading on the overall index on consumer sentiment edged up to 57.8 from 55.7 on a month over month basis, which had been the lowest level since November 2008. It topped expectations of 56.5 among economists polled.  Unfortunately, forward looking confidence did paints a bleak picture.  The gauge of consumer expectations dipped to 47.0 from 47.4. It was the lowest level since May 1980. The economic outlook for the next 12 months fell to 38 from 40.

CBOE Volatility Index (.VIX) is down .99 to 30.98 and off 27 percent since Monday morning, when the “fear gauge” opened the week at 42.56. Trading is active in VIX options, but not due to the expiration. This month, VIX options expire after the standard expiration and the last day to trade September options on the volatility index is next Tuesday. Instead, the options action is focused on October calls on VIX and includes substantial ratio spreads. The Oct 25 – 32.5 (1X2) was bought at 77.5 cents, 5000X and at 82.5 cents, 31000X. The spread appears to be targeting VIX at 32.5 through the October expiration, which is in 32 days.   The VIX was able to hold support near the 50-day moving average.

 

In a blow to the technology sector RIM announced earnings after the bell on Thursday that were much worse than expected. The company said it shipped far fewer BlackBerrys and PlayBooks than analysts had anticipated. RIM was down nearly $20% as a number of analysts cut their recommendations or price targets on RIM.

Ingersoll Rand (IR) was hire and options volume is 4X the daily average, with 11,000 calls and 1,780 puts traded in the name. The focus is on Oct 36, 38 and 40 calls. The heightened activity is being related to reports that United Technologies is raising cash to make a big acquisition, which is driving increased activity in Tyco today as well. The Reuters report also mentioned Rockwell Collins (COL), Honeywell (HON), and Textron (TXT).

 

Equity markets moved higher along with European stocks, after five major central banks announced new facilities to improve dollar liquidity in the repurchase market. The ECB, FOMC, BOE, SNB and BOJ announced this new action aimed at avoiding any new liquidity crisis. The action addresses the shortage of dollar availability as U.S. lenders who are withholding funds.

Markets rallied despite mixed economic news on jobs, inflation and manufacturing. Initial jobless claims increased by 11,000 to 428,000 for the week ended Sept. 10, according to the Labor Department. Jobless Claims filed in the previous week were revised to 417,000 from an originally reported 414,000. The increase was larger than expected. Economists had forecast claims would rise by 1,000. The four-week moving average of new claims, increased by 4,000 to 419,500.

On the manufacturing front investors saw mixed numbers. Industrial production climbed 0.2%, according to the Federal Reserve, while capacity utilization moved to 77.4%. Economists surveyed by had forecast flat production and a capacity utilization rate of 77.5%. Production in July had climbed 0.9%, while capacity utilization was 77.3%.

In a regional manufacturing survey, the Philadelphia Federal Reserve said its index of current activity was -17.5 in September, an improvement from the -30.7 reading in August. Economists had forecast a reading for September of -16.

On the inflation front, CPI rose 0.4% from July as gasoline, food and shelter costs continued to increase, according to the Labor Department. In July, consumer prices were up by 0.5%. Compared to a year earlier, prices rose by 3.8% in August. Core inflation, rose by a more moderate 0.2% in August. Economists surveyed had forecast a 0.2% rise for both underlying inflation and overall prices.

In other banking news, UBS is fell to new 52-week lows and options on the bank saw brisk trading on news a rogue trader racked up roughly $2 billion in losses at the Swiss bank. Shares hit $11.4 in morning trading and are down $1.14 to $11.54. Options volume in the first hour of trading was 1,285 calls and 3,310 puts. By way of comparison, typical volume in UBS through the first hour is about 280 contracts.
Despite the rally in equities and the seemingly good feeling that has been created by the calming of the current European storm, the VIX has remained elevated. The downward movement will likely test the 31% level, which has held in two prior tests in August. Support is also seen near the 50-day moving average which is close to 30%. The upside has been capped by 48%, which has held as resistance 8 times in the last 20 year and only having that level breached during the financial crisis of 2008/2009.

 

After the bell, Research in Motion reported second-quarter adjusted earnings of 80 cents a share, on $4.17 billion in revenue. Analysts expected earnings of 90 cents a share on revenue of $4.5 billion. Guidance for the third quarter sluggish as well. Analysts were looking for a range of $1.20 to $1.40 a share, at the low end of estimates.

Equity markets edged higher but gyrated from positive to negative, as European shares lead US stocks higher. A slightly better than expected IBD/TIPP small business poll , helped stocks gain some traction, despite a weaker than expected 10-year note auction. Industrials were driven higher by Cummins after President and Chief Operating Officer Tom Linebarger told investors that 2011 would be another record earnings year for the diesel engine maker.

Investors remain pessimistic about the economy and the future, according to the latest IBD/TIPP poll released Tuesday, but confidence rebounded somewhat from Augusts’ record low. The IBD/TIPP Economic Optimism Index rose 4.1 points, or 11.5%, to 39.9. The gauge hit the lowest level in its 10-year history in August.

JetBlue calls were very active today, trading nearly 7500 contracts, or 8x the typical volume in the shares. Coming in today, JBLU call open interest of 60K is the highest since January, and the largest concentration is in Dec 7 calls, with 11572 contracts.

Options volume in Office Depot (ODP) ran 3X the daily average. 6,600 calls and 720 puts traded in the name. Shares were up 19 cents to $2.50 and Sep 2.5 calls, which are ten cents OTM and expiring in three-and-a-half days, are the most actives. 3,444 traded (89 percent Ask) against 1,405 in open interest.

Implied volatility in Seagate Technology (STX) moved higher amid heavy trading in puts on the storage device-maker. Shares are up 1.5% and 17,000 contracts traded. Typical put volume is about 3,100 and call activity has amounted to 2,410 contracts today. Dec 10, 11 and 12 puts are the most actives. Implied volatility is up 10.5 percent to 69, as players brace for the next big move in Seagate shares. The stock stumbled in August and was weighed down by an S&P downgrade to Sell on the 18th. From Jul 20, when earnings were reported, to Aug 19, STX tumbled 40.7 percent. Shares are now up 13 percent from 8/19 52-week lows and have been trading in a narrow range over the past few.

Both volume and volatility remained stable, with the overall volume on both the NYSE and Nasdaq trading near the medium term moving average. Volume soared in the early downdraft in August but has leveled out as the markets has consolidated. The VIX volatility index remained stable near the 38% level, after test 44% early on Monday. 48% seems to have been solid resistance and could be a precursor to a market rally.

Equity markets in the US were hammered at the end of the week, as investors focused their attention on European issues. With the on German representative on the ECB resigning Friday, the Euro was hammered as investors believe the hawkish tone of fighting inflation has ended. Yesterday’s comments from Trichet have given investors hope that the ECB will potentially reverse course and cut rates in the near future.

With the Swiss National Bank fixing their currency to the Euro mid week, investors piled into other safe haven instruments such as volatility and gold. The VIX volatility index soared nearly 17% at its peak on Friday, as investors purchased downside protection.

On Thursday evening President Barack Obama unveiled his proposal to pass a $447 billion package of spending initiatives and tax cuts to boost economic growth. More than half of Mr. Obama’s plan consists of payroll-tax cuts for employees and employers. The 447 billion headline number was larger than most analysts expected. The plan could add 1% to grow and push the unemployment rate down a percent to 8.0%
US markets were driven lower by financial institutions on the last trading day of the week. Bank of America Corp. are contemplating eliminating 40,000 positions during a restructuring that Chief Executive Brian Moynihan is expected to undertake. The CEO will likely focus on the bank’s expected savings, after telling investors last month that he aims to reduce quarterly expenses by as much as $1.5 billion.

Yahoo (YHOO) shares made a run to $14.56 in morning trading, but the gains were lost and shares moved lower. Options on Yahoo saw brisk trading, with 42,000 calls and 16,000 puts traded on the Internet giant. The top trades of the day are part of a ratio spread, in which the strategist sold 2,700 Sep 14 calls at 74 cents and bought 5,400 Sep 16 calls at 20. There is speculation that Yahoo has hired Director Kenny to form a Strategy and Transactions Committee.

The VIX moved more than 12% higher, bouncing off of support levels earlier in the week near 31%. Further support is seen near the 50-day moving average near 29%. The VIX has traded in a well defined range between 48% and 31% since the beginning of August. The pattern is consolidative in nature and is likely to show momentum after the markets breaks to a specific direction. Resistance on the VIX is seen near 45% and then again at 48%.

The Nasdaq Volatility index, also moved higher but like the VIX was unable to stay above the 40% level. The 20-day moving average near 35% was solid support where 45% and 46% are seen as solid resistance. Looking forward, the markets are likely to continue to show historical movements that are in line with the current implied volatility.

Trading was slow through midday, but the selling pressure surfaced in the second half of trading Thursday after investors digested the latest speech from Federal Reserve Chairman Ben Bernanke. Gold prices continued to climb and the Euro moved lower breaking through support.
The FOMC Chairman pointed to the Administration and told economic club questioners that fiscal stimulus was need to assist growth.

President Barack Obama addressed congress to push a jobs package. The White House doesn’t expect Congress to adopt every stimulus proposal he will put forward, a list likely to include new spending on transportation and infrastructure, the extension of a payroll tax cut for workers and a new payroll tax reduction for employers.

The Chairman pointed to a number of weak points in the US economy. This included unusually weak consumer spending and how debt problems in Europe hurt household and business confidence over the summer. He also noted the Fed expects inflation to moderate over time following the spike caused earlier this year by high energy and food prices.

In economic news was mixed. Weekly Jobless Claims increased by 2,000 to 414K in the period ended Sep 3. Economists were looking for a decline of about 10,000. Meanwhile, the Trade Balance narrowed to $44.4 billion in July and much more than expected thanks to record exports of autos, airplanes and other goods.

Although the Fed Head pledged to help the economy as needed, he failed to offer any concreted details of plans for monetary stimulus. Collective disappointment hit the Street and the Dow Jones Industrial Average is sporting a 119-point loss. The tech-heavy NASDAQ lost ground and the CBOE Volatility Index (.VIX)was up .96 to 34.34 amid light volume in the options market. 6.6 million calls and 6.9 million puts trading.

In the airline space, UAL loses 53 cents to $18.01 and the top options trade in the airliner today is a 4400 contract block of Dec 35 calls at 38 cents. The trade coincided with 2200 Dec 19 calls at $1.85 and 2200 Dec 30 calls at 9 cents. The same spread traded at $1.19, 800X. Both spreads traded on AMEX.

In precious metal land, Market Vectors Gold Mining ETF (GDX) rallies $1.37 to $66.80 and notched new highs today after the yellow metal surged $54.1 to $1,869 an ounce. A noteworthy spread in the fund today is a three-way, in which the investor bought 14750 Dec 50 puts and sold 14750 Dec 60 – 66 call spreads, collecting $2.79 on the package. It probably closes some of a position opened about two weeks ago when one player sold 44,200 GDX Dec 50 puts to buy 29,500 Dec 60 – 66 call spreads, collecting $1.9 million on the package (see 5/24 color.) Shares are up 12.7 percent since that time and half the call spread, 33 percent of the puts, are being closed out.

 

The VIX moved up nearly 9%, as equity markets in the US gyrated moving lower by more than 2% at the session lows, but pared losses during the close on weaker than normal volume. A better than expected ISM non-manufacturing, failed to help investors gain confidence.

In US Economic news, The U.S. service sector defied expectations and strengthened in August, according to non-manufacturing ISM. The ISM’s services purchasing managers’ index rose to 53.3 from 52.7 in July. Economists had expected last month’s PMI to fall to 51.0. The ISM said last month’s new-orders index rose to 52.8 from 51.7 in July, while business activity/production index slipped to 55.6 from 56.1. The ISM employment index fell to 51.6 last month from 52.5 in July. The prices index increased to 64.2 from 56.6.

Financial stocks dragged on the larger indexes as Bank of America was down 4%. The real story occurred in the credit default swap market. Bank of America’s five-year CDS spread was 13% wider on the session, 60 basis points higher than the point where Warren Buffett announced his rescue plan. Morgan Stanley’s 5-year spread was also up 13%, and Goldman’s CDS was up 13% to 243 basis points.

Despite the large slide in prices, the move lower was not accompanied by a increase in volume. Volume was below average, which is typical for a post-holiday session. The combination of a price plunge in holiday-dampened volume is rare, but it does happen. Lack of volume is usually a sign where there is low conviction.

Citi (C) is down 2.4% amid weakness in the sector after Federal regulators filed lawsuits against 17 major banks related to soured mortgage loans. In options action, an interesting three way trades in Citi on the ISE. Sentiment data indicate that one strategist sold 5,000 October 20 puts at 90 cents to buy the Jan 36 – 41 (1X2) call ratio spread at 31 cents, 5000X (10000 Jan 41 calls sold at 46 cents). This looks like a bullish play, or a bet that Citi shares will hold above $20 through the October expiration in 45 days and then rally through mid-January 2012. Shares are down 11.6 percent since last-Wednesday, but still up 8 percent from an intraday 52-week low of $25.4 set on 8/23.

GE loses 55 cents to $15.21 and one strategist sold 16,000 Nov 18 calls on the stock at 13 cents and bought 18,500 Nov 13 puts at 44 cents. The bearish combo might close out a position opened last week, when the Nov 13 – 18 bullish risk-reversal traded at 11 cents, 20000X.
The VIX moved higher and remained above the 20-day moving average support near 37.07. Additional support is seen near the 5-day moving average at 33.50.

Stock market averages were deep under water after the latest jobs data fell well short of expectations. According to the Labor Department, the US economy added zero new jobs last month. Economists were looking for about 100,000 new jobs. The unemployment rate was stuck at 9.1 percent and average hourly earnings declined by .1 percent. If that wasn’t bad enough, June and July numbers were also revised lower. Volatility across the Eurozone is also weighed on investor sentiment. France’s CAC 40 Index, Germany’s DAX and Spain’s IBEX all fell more than 3 percent on concern plans to help debt-ridden Greece are falling apart. The Dow Jones Industrial Average 2.2% while the NASDAQ more down 2.5%. CBOE Volatility Index (.VIX) jumped 1.82 to 33.64. For the week, the VIX is down nearly 5%. Trading volume was low ahead of the three-day Labor Day weekend, with 5.7 million calls and 6.5 million puts traded.

In the technology space, Microsoft (MSFT) lost 39==40 cents to $25.82 and is one of thirty Dow stocks trading lower Friday. Recent options trades in the software-maker include an Oct 17.5 – 25 (2X1) put ratio spread, bought at 67 cents, 7500X. The strategist bought one 25 put and sold two 17.5s. If so, the strategist is bracing for additional volatility in MSFT shares, as the max payoff at expiration is at $17.5 per share, which represents a 30.9 percent loss in MSFT over the next 7 weeks. 30,000 calls and 40,000 puts now traded in Microsoft, which is about typical volume for the name.

SilverCorp Metals (SVM) fell to new 52-week lows and is down $1.06 to $7.35 after the company received a letter from an anonymous source alleging accounting fraud. The letter was apparently forwarded to the company from the Ontario Securities Exchange. Options on the stock are seeing brisk trading as well. 22,000 calls and 34,000 puts traded. Sep 6 and 7 puts saw the most action. The activity seems to include a mix of buying, selling, opening and closing activity. Implied volatility in options on the stock is up another 31 percent and moving to new highs at 176 percent.

In the financial space, Wells Fargo (WFC) loses 89 cents to $24.34 and 10900 Jan13 $25 calls on the bank are bought at $4.25. The block looks opening and was tied to stock. Jan13 $25 calls on Wells Fargo are now 2.7 percent OTM with a delta of .55 and 9,991 in open interest. Shares are down 6.8 percent over the past two days, but 7.7 percent above the intraday 52-week low of $22.58 set on 8/10. Wells Fargo last reported earnings on 7/19.

US Stock market indexes declined on very light volume as volatility continued to consolidate in front of Friday employment report. Economic data was in focus early after the Labor Department said jobless claims declined by 14,000 last week, which was roughly in-line with expectations. The number didn’t seem to have much market impact and investors are awaiting monthly jobs numbers, which are expected to show 100K new jobs and an unemployment rate unchanged at 9.1 percent.

The other economic news was mixed, as the August ISM Manufacturing Index fell less than expected (50.6 vs. 48.6 consensus), but construction spending was worse than anticipated for July (-2.3 percent vs. 0 percent). Meanwhile, the automakers – Ford (F) and GM were lower after their respective monthly auto sales numbers and Costco (COST) is among a handful of retailers rallying on August same store sales results.

There’s a lot of news flow, but not much volatility continued to consolidate. Volume was very light, as some players might have already hit the exits in ahead of the three-day Labor Day weekend. 5.9 million calls and 6.8 million puts traded across the exchanges.

18,000 calls and 900 puts traded in Cisco (CSCO) during the first minutes of trading on the first day of September. CSCO is trading up 1 percent to $15.83 and was the Dow’s best gainer. In options action, 9,440 Sep 17 calls traded on the networking giant. 96 percent traded at the ask and open interest is 31,637. Sep 16 and the Weekly (9/9) 16 were purchased. Shares touched 52-week lows of $13.3 on 8/9 and then rallied 16 percent two days later after earnings were reported. CSCO has traded in a narrow range since that time, with resistance just north of current prices or near $16 per share.

Research In Motion (RIMM) declined 2% with options trades in the Blackberry-maker include a bearish combo, in which the strategist bought 9,200 September 29 puts 91 cents and sold 9,200 October 42 calls at 64 cents. The risk-reversal is tied to 375K shares at $32.81 and looks opening. Shares have rallied 52.8 percent off the 52-week low of $21.8 set on 8/8 and the position might have been initiated in anticipation of heightened volatility in RIM heading into a Sep 15 earnings release.

Xerox (XRX) more than 2% to $8.14 and an Oct 8 – 9 strangle is apparently sold on the stock at 68 cents, 5000X on ISE. It’s traded multiple times and volume in both contracts is more than 15000X. The was an opening position and seems to reflect expectations for shares to hold between $8 and $9 over the next 7 weeks. Shares hit a 52-week low of $7.3 on 8/19, but have rallied 12.2 percent since that time.

Equity market averages chopped around for most of Yesterday’s trading session and moved higher with a late surged toward the end of trading. The latest batch of economic news was mixed. Data released before the opening bell showed the US economy adding 91,000 private sector jobs in August, which was 9,000 less than expected and comes two days before the Labor Department releases its key monthly jobs report. The VIX continued to decline, and Oil prices tested resistance levels.

On the manufacturing front, the Chicago PMI Index was released mid-morning and fell to 56.5 in August, which was down from 58.8 the month before, but much better than the 53.0 that was expected. A third report showed Factory Orders up 2.4 percent in July and .6 percent more than expected.

Solid gains across Eurozone equity markets, including a 3 percent rally in France’s CAC 40 Index, also helped to set a positive tone for trading on Wall Street. The Dow Jones Industrial Average was attempting a triple-digit gain through midday. The markets eventually settled higher with the DOW and the S&P 500 Index closing up .5% and the Nasdaq 100 inching out a .1% gain.

The VIX volatility index moved lower closing below support levels near 32%. The next level of support is the 50-day moving average near 26.5%. Trading in the options market includes 7.8 million calls and 8.5 million.

In bullish options flow, Sprint (S) saw heavy trading after the Department of Justice filed to block AT&T’s proposed acquisition of T-Mobile. Sprint shares took a 13.7 percent hit on Mar 21 when the deal was announced. The stock is up 21 cents to $3.77 or nearly 6% and options volume in the name included 43,000 calls/2300 puts. September 4 calls, which are 5.5 percent out-of-the-money and expire in two-and-a-half weeks, were the most actives. 15,700 traded. Sep 3.5, Sep 5, Oct 4 and Jan 6 calls on Sprint were very busy as well. Shares are on a four-day 18 percent winning run higher, but remain 26 percent below the levels seen before the stock gapped lower on a 7/28 earnings release.

The tech heavy Nasdaq saw its share of options volume. Top options trade was in the Qs after one strategist sold 70000 Sep 51 puts at 22 cents and 50000 Sep 54 puts at 75 cents to buy 70000 Oct 53 puts at $1.43. Shares were up 9 cents to $55.06. Overall volume in the QQQ was impressive, with 532K puts and 64K calls traded in the product during the first thirty minutes of the trading day.