"Big Bailout Coming" was the leaked headline that drove the market off the lows yesterday. While we wait for whatever approach to bailout and recapitalize the banks, volatility and headlines will be driving this market. So here are a few things to think about this week as we have this new-found volatility. First (as I mentioned yesterday), this is Expiration week so rolling your October positions in this volatility is a potential gift. Second, if you are establishing new positions in November, recognize that the market is volatile, 5X median on the VIX of 22. So strategically if I were bullish, I would consider in-the-money call verticals. If I were bearish, I would consider buying out-of-the-money call calendar spreads (sell November call and buy December call with both options at the same strike). I'll be watching the headlines and will trade accordingly. Here's the latest --Germans still not on board. See you Midday.
Trading is mixed on earnings news. Traveler's (TRV) is up 5.3 percent and the best gainer in the Dow Jones Industrial Average after the insurance company posted earnings that fell short of Street estimates, but revenues topped expectations. Intel (INTC) is the second best gainer in the industrial average after the chipmaker released earnings that beat analyst estimates. Twenty Dow stocks are higher and the industrial average has added 49 points. However, Apple (AAPL) shares lost 3.8 percent and are weighing on the NASDAQ after the company missed Street estimates for the first time in at least six years. In other news, the euro edged up .4 percent on the buck and trading was steady across Eurozone equity markets Wednesday on hopes for an EU bailout. The domestic economic news was positive as well after data showed Housing Starts up a better-than-expected 15 percent in September. Still, the CBOE Volatility Index (.VIX) is up 1 point to 32.56 midday and options volume is picking up heading into the options expiration. 3.7 million calls and 3.5 million puts traded across the exchanges through 11:30am ET.
Bullish Flow Lennar (LEN) shares are down 13 cents to $15.79 today, even after data showed Housing Starts up 15 percent to a better-than-expected annual rate of 658,000 in September. Shares slipped today, but gained more than 9 percent Tuesday after the National Association of Homebuilders [NAHB] reported that its index of homebuilder sentiment [HMI] jumped to 18 in October, from 15 the month before. It was the largest increase in the index since April 2010. Two days of upbeat data from the housing industry is perhaps the motivation for increased options action in LEN today. 11,000 calls and 455 puts traded on the stock so far. The top trade is a 3,000-contract block of May 20 calls at $1.15 when the market was $1.07 to $1.15. 6,129 traded vs. 23 contracts in open interest. The apparent call buying looks like bullish trading in LEN on hopes for a rally beyond $20 through the May 2012 expiration. The company reported earnings one month ago and shares are up almost 10 percent since that time.
New Gold (NGD) shares are down 6 cents to $11.24 and options volume in the Vancouver-based miner surged Wednesday. The focus is on November 11 calls, which are now 24 cents in-the-money and expiring in 30 days. 43,000 contracts traded against 1,698 in open interest. The flow seems to include a mix of buying and selling activity. The flurry of activity is apparently being driven by a newsletter recommendation.
Bearish Flow Abercrombie and Fitch (ANF) is down $1.40 to $68.97 after an 18 percent rally since October 3. At least one player in the options market seems to be bracing for additional weakness in shares of the apparel retailer, as November 70 - 60 put spreads are being bought on the stock today. An hour into trading, 2750 November 70 puts traded at $4.41 and 2750 November 60 puts at $1.16. Both blocks traded on ISE, where data indicate the spread was bought-to-open. If so, a $3.25 debit was paid and the spread offers its best payoff if shares fall to $60 or less through the November expiration. 8,500 now traded in both contracts.
Alcatel Lucent (ALU) is seeing a flurry of options activity today. Shares are down 29 cents to $2.65 on an analyst downgrade after recent results from Sony and Juniper Networks pointed to weakness in Europe. ALU is down on the cautious commentary and options volume on the telecomm is 58,000 puts and 2,335 calls. December 4 puts are the most actives. 28,815 traded and 77 percent hit at the ask. Another 24,655 December 3.5s traded and 83 percent traded at the Ask. Heavy trading at the offer suggests put buying and implied volatility in the options on the stock is up 28 percent to 97. Some of the flow might be closing, as both contracts are now well in-the-money and have substantial amounts of existing open interest.
Unusual Volume Allstate (ALL) options volume is running 6X the (22-day) average, with 38,000 contracts traded and call activity accounting for 98 percent of the volume.
Abbott Labs (ABT) options volume is 3X the average daily, with 36,000 contracts traded and call volume representing 56 percent of the activity.
Agnico Eagle Mines (AEM) options volume is running 4.5X the average daily, with 35,000 contracts traded and call volume representing 52 percent of the total volume.
Increasing options activity is also being seen in DR Horton (DHI), Toll Brothers (TOL), and SPDR Homebuilders Trust (XHB)
Implied Volatility Mover Implied volatility in the options on Agnico Eagle Mines (AEM) is moving up today. Shares of the miner are down $10.53 to $46.57 and falling to new 52-week lows today after the company announced it was suspending production at a Goldex mine due to a ground stability issue. Shares are reeling on the news and options volume on the stock is running 4.5X the daily average, with 19,000 calls and 17,000 puts traded so far. October and January 45 puts are the most actives and implied volatility in AEM options surged 31 percent to 57.5 on the negative headline.
News 
Market Data 
Discover 
