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Look for Volume 05-18-2012

jcusick — Fri, 18 May 2012 15:05:53

Cusick's Corner 05-18-2012
The term capitulation (surrender or giving up) has been often used when referencing the latest market action. While this action has been negative, I have not seen the volume that might represent a bottom or "V" bottom setting up. Looking at late summer and early fall 2011 SPY charts, when the market turned north there were 300 million plus shares of daily volume in SPY. This negative action actually has been a positive to Gold, GLD, and in markets which have popped off their lows which now could be acting as more of a safety trade because Bonds, TLT, and the Dollar have been running quite fast and are much further on the upside move than beaten down Gold. Remember this is expiration Friday for equity options, so manage that risk before the close. See you After Hours.

Market action is mixed through midday Friday. With no domestic economic news to guide the morning trading, the underlying tone remains cautious after the S&P 500 fell in 10 of the last 12 trading sessions. Eyes remain on events in Europe and trading was relatively orderly across Eurozone equity markets. Germany's DAX lost .7 percent and France's CAC 40 slipped .3 percent. The euro edged up .2 to 1.2725 on the buck. Wall Street opened steady as well and ahead of the much-anticipated Facebook (FB). The offering was delayed a bit and then, after an initial 12 percent rally, the stock fell back to its $38 offering price. Trading has been whippy since that time, but the offering seemed to be somewhat of a disappointment. The broader market fell shortly after Facebook shares started trading and the Dow is now down 14 points midday. The NASDAQ lost 11 points. CBOE Volatility Index (.VIX) slipped .35 to 24.14. Trading is active due to the expiration, with approximately 4.5 million calls and 5.7 million puts traded across all the exchanges through 11:40am ET.

Bullish Flow
Long-term trade in JC Penney (JCP) Friday morning seems to reflect hopes for a rebound in the stock. Shares of the retailer are up 29 cents to $26.23 today, but have dropped 21.3 percent since earnings were reported Wednesday afternoon. A longer-term trade in the options market seems to reflect expectations for a rebound after a three-way spread traded in the January 2014 options on JCP. In this spread, the investor sold 5,000 $23 puts on the stock at $4.55, bought 10,000 $30 calls for $4.85 and sold 10,000 $37 calls at $2.70. In other words, downside puts were sold to buy 2X as many upside 30 - 37 call spreads. 25 cents was collected on the package and the investor is probably a willing buyer of the stock for $23 through Jan 2014. Therefore, they were willing writers of January 2014 $23 puts. The premium was used to buy an upside call spread.

Blackstone (BX), a New York-based asset management firm, is up 15 cents to $11.69 and options volume on the stock through midday is 21,000 call and 1,350 puts. The flow includes a 13,000-contract block of September 13 calls for 66 cents per contract. It is an opening buyer, according to data from the options exchange. More than 17,000 now traded. Jun 13, Dec 13, and Jan [2014] $15 calls on BX saw interest as well. There are no headlines to explain the heightened activity and the order flow comes as shares saw a 5 percent rally off morning lows.

Bearish Flow
NASDAQ OMX Group (OMX) is off 55 cents to $22.45 on heavy volume of 4.6 million shares and options on the stock are seeing active trading as well. 7,790 puts and 1,390 calls so far. May 23 puts, which are now 2.4 percent in-the-money and expiring after today, are the most actives. 4,160 traded. May 22 and June 23 puts are seeing interest as well. Implied volatility in NASDAQ options is up 15 percent to 33.5. There are no headlines on the stock. The bearish flow might reflect concerns about generally poor market conditions this week and also the lackluster debut in the highly-anticipated Facebook IPO, which started trading today on the NASDAQ Stock Market.

SPDR Financials (XLF) is off 6 cents to $13.87 in heavy volume of 64 million shares and options on the exchange-traded fund remain actively traded today. 249,000 puts and 65,000 calls so far. The flow includes a morning buyer of 50,000 June 13 puts for 21 cents per contract and a buyer of 23,000 August 13 puts for 54 cents. Some of the buying might be rolling out of May 14 puts, which are in-the-money and expiring after today. 64,500 XLF May 14 puts have traded so far today.

Unusual Volume
Sara Lee (SLE) options volume is running 22X the (22-day) average, with 73,000 contracts traded and call volume accounting for 67 percent of the volume.

NetApp (NTAP) options volume is 3X the average daily, with 55,000 contracts traded and call volume representing for 69 percent of the activity.

SPDR Utilities (XLU) options volume is running 9.5X the average daily, with 55,000 contracts traded and call volume accounting for 98 percent of the activity.

Increasing options activity is also being seen in Renren (RENN), Assured Guaranty (AGO), and USG.

Implied Volatility Mover
Implied volatility in the options on Zynga (ZNGA) is easing on the heels of today's Facebook IPO. Zynga makes games like Farmville and Drop 7 that are used with Facebook and there had been increasing interest in the options on the stock ahead of the offering. The stock fell to a low of $7.08 after FB made its debut, but has since recaptured some of the losses and is down 47 cents to $7.80. 33,000 calls and 17,000 puts traded on the stock and implied vols are easing 13.5 percent to 93.

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Pressure Continues 05-17-2012

jcusick — Thu, 17 May 2012 16:24:31

Cusick's Corner 05-17-2012
The challenge is on and the market's current grinding moves are tough to watch. But it is important to respect this move, especially if you see the Dow Industrials and the S&Ps down 9 of the last 10 days. I want to see this market hold these levels, 1315 on the SPX, and any headline that is remotely positive could be the catalyst that could stabilize the market and get some of the weaker shorts to potentially cover. This is the last day to trade a lot of May index options, so make sure you clean up all your risk before the close. See you After Hours.

Stock market averages are near session lows on disappointing economic news and amid ongoing worries about debt problems in Europe. Trading was steady early after the Labor Department reported that Weekly Jobless Claims were unchanged at 370,000 in the period ended May 12. However, trading quickly turned mixed at the open and then stocks slipped after the Philadelphia Fed Survey of manufacturing activity showed surprise contraction of -5.8 in May, which compared to 8.5 in April and confounded expectations of 8.8. Separately, the list of leading economic indicators was down .1 percent in April. A .2 percent increase was expected. On the other side of the Atlantic, key stock benchmarks suffered losses ranging between 1.1 and 1.5 percent. The euro slipped .2 percent to less than 1.27 on the buck. Crude oil is flat at $93.19 per barrel, but gold surged $40 to $1576.50 an ounce. The Dow Jones Industrial Average is down 100 points and the NASDAQ lost 38. CBOE Volatility Index (.VIX) is up 1.25 to 23.52 and near session highs. Trading is active heading into options-expiration Friday, with approximately 4.5 million calls and 6.1 million puts traded across all the exchanges through 11:45am ET.

Bullish Flow
Walmart (WMT) is a bright spot on an otherwise uninspiring day of market action Thursday. Shares of the world's largest retailer are up 5 percent to $62.15 and easily the best gainers in the Dow Jones Industrial Average. Options on Walmart are seeing very heavy trading today as well. 61,000 calls and 31,000 puts so far. May 62.5 calls, which are now 35 cents out-of-the-money and expiring after tomorrow, are the most actives. 16,700 contracts have changed hands some investors might be liquidating positions and rolling to the June 62.5 calls, which are the second most actives. 7,390 contracts have traded so far.

MEMC (WFR) is off 43 cents to $1.69 in heavy trading of 14.5 million shares after the silicon wafer company announced the departure of its Chief Financial Officer. The stock is falling to levels not seen in over a decade and options on WFR are seeing brisk trading. 9,350 calls and 1,945 puts traded on the stock so far. June 2 calls, which are falling 18.4 percent out-of-the-money and expiring in 29 days, are the most actives. 3,836 contracts changed hands. July 2 and July 1 calls are the next most actives, as some players are possibly looking for the stock to bounce after the 53.2 percent month-to-date drop seen so far in May.

Bearish Flow
High put volume is being seen in the exchange-traded funds Thursday. 3.3 million contracts have traded across all the products so far, which is double the call volume and also 2X the expected volume for midday. SPDR 500 Trust (SPY) is down $1 to $131.82 on 121 million shares traded. Options volume on the Spiders is 1.5 million puts and 690,000 calls. The SPDR Financials (XLF) sees high levels of bearish flow today. Shares, which hold all of the financial names from the S&P 500, are down 14 cents to $14.08 on surging volume of 91 million shares. Meanwhile, 485,000 puts and 57,000 calls traded on the ETF - a ratio of more than eight-to-one.

Chesapeake (CHK) is falling to 52-week lows today in active trading 21 million shares. CHK is down 50 cents to $13.54 and has tumbled 45.9 percent over the past two months. Trading in the options on the natural gas producer is brisk, with 47,000 calls and 49,000 puts traded in CHK so far. The top trades are part of a ratio spread, in which 5,000 October 13 puts were bought for $3.20 and 10,000 October 9 puts sold at $1.55. The 1X2 put ratio spread, for a 10-cent net debit, seems to be a view that the stock will continue falling through October, but perhaps find a floor around $9 per share. Since they sold 2 Oct 9 puts for every 1 Oct 13 put that was purchased, they are possibly willing buyers of shares at that price.

Unusual Volume
SPDR Financials (XLF) options volume is running 4X the (22-day) average, with 518,000 contracts traded and put volume accounting for 89 percent of the volume.

SPDR Basic Materials (XLB) options volume is 3X the average daily, with 110,000 contracts traded and put volume representing for 97 percent of the activity.

SPDR Homebuilders (XHB) options volume is running 3X the average daily, with 42,000 contracts traded and put volume accounting for 89 percent of the activity.

Increasing options activity is also being seen in Walmart (WMT), NetApp (NTAP), and MBIA (MBI).

Implied Volatility Mover
Implied volatility in the options on Best Buy (BBY) is moving higher as shares of the electronics retailer fall to new 52-week lows today. BBY is down 30 cents to $18.62 and has lost 30 percent since earnings were reported in late-March. It seems that some players in the options market are bracing for additional volatility in the stock, as 18,000 puts and 5,390 calls traded in BBY today. May 18 and 19 puts are the most active and implied volatility is moving up 16 percent to 63.5, which is new 52-week highs for IV in Best Buy options.

Watch the Claims Data Tomorrow 05-16-2012

jcusick — Wed, 16 May 2012 18:26:48

Cusick's Corner 05-16-2012
Readers may not like where I have been going the last few Corners, but after a Greek run on the banks and mixed economic data, the major sectors, XLF, XRT, and XLY (offensive sectors) are at or close to challenging support. These levels that are being potentially challenged are game changer levels, especially in the Finance sector, where a break in the $14.50 could signal that the Bears have gained the momentum. If you narrow on the banking segment, the big boys like JPM, BAC are under pressure but the smaller regional banks, KRE, PNC, CYN, are all holding up much better and I will be keeping an eye on these segments. The Claims data has the potential to catalyze the pre-market; anything north of 365K could add more pressure to the market early. Tomorrow is the last day to trade cash-settled indices so tie up all loose ends. See you Midday.

Although stock market averages had moved modestly higher into midday with help from economic data, selling pressure resurfaced in the second half of trading Wednesday. Data released early showed Housing Starts up to an annual rate of 717,000 in April, from 699K last month and better than the 680K that was expected. Separately, it was reported that Industrial Production was up 1.1 percent in April and .6 percent better-than-expected. With relatively quiet action seen across European equity markets, stocks moved broadly higher on the data through midday. Modest gains didn't last, however, and ongoing volatility in the commodities markets has been the subject of discussion among some investors. Crude oil lost another $1.36 to $92.62 and gold gave up $17.8 to $1539.30 an ounce. Minutes from the latest Federal Reserve meeting on monetary policy might have motivated some afternoon selling as well. While the text didn't hold any surprises, it also failed to lay the groundwork for further monetary easing. For whatever reason, stocks moved broadly lower again in afternoon action and the Dow lost 33 points on the day. The tech-heavy NASDAQ gave up 19.72 points.

Bullish
Banking giant Citigroup (C) lost 87 cents to $26.92 in active trading of 45 million shares and is on a four-day 12.6 percent losing streak. Shares are off nearly 30 percent since March 20. The decline might have motivated an investor to buy big blocks of calls on the bank today. Total volume was 166,000 calls and 86,000 puts. The two largest trades were initiated by the same investor. They bought 35,000 September 33 calls on Citi for 92 cents per contract and 32,500 November 34 calls for $1.16. Both blocks look like new positions in Citi (because volume exceeds open interest). The same investors also sold 1.85 million shares at $27.85. Taken together, the action is possibly part of a stock replacement strategy. That is, the investor had a large position in Citi shares and is liquidating it after the recent decline in the share price. At the same time, they're buying upside calls on the bank to possibly maintain a bullish position that requires less capital.

Bullish trading was also seen in Morgan Stanley (MS), Weatherford (WFT), and Darden Restaurants (DRI).

Bearish
161,000 puts and 73,000 calls traded on Microsoft (MSFT) today. The stock lost 31 cents to $29.90 in active trading of 60 million shares and was one of 17 Dow stocks to finish lower. The top trades of the day in the software-maker were part of a four-way spread after 20,900 May 32 puts traded on the stock at $2.15 and 20,900 May 27 puts for a penny per contract. 20,900 June 32 puts traded on the stock for $2.27 and 20,900 June 27 puts at 17 cents. Taken together, the spread appears to be a roll with the investor closing a hefty May 27 - 32 put spread at $2.14 to open a new June 27 - 32 put spread for $2.10. If so, the investor collected 4 cents on the four-way and is possibly looking for the stock to fall (or to hedge a stock position) for another month. May options expire at the end of this week.

Bearish trading was also seen in Sara Lee (SLE), Dell Computer (DELL), and Estee Lauder (EL).

Index Trading
Puts on the S&P 500 Index (.SPX) remain heavily traded. 700,000 puts traded on the S&P 500 Monday, which was the third highest put volume day for the product so far in 2012. 645,000 more traded yesterday. Today, volume in the SPX pits was roughly 914,000 puts and 397,000 calls, which is the second highest put volume day for the S&P 500 so far this year. The S&P 500 lost 5.86 to 1324.80 and some of the high put volume is probably related to the expiration. Many May index contracts stop trading tomorrow before the settlement value is computed Friday morning. May 1,300 puts on the SPX were the most actives. However, not all of the activity was in the May contracts, as June 1350 puts, June 1330 puts, and June 1350 calls on the S&P 500 were very busy today as well.

ETF Action
iShares Dow Jones Real Estate Fund (IYR) loses 77 cents to $62.16 and options volume in the ETF was 5X the daily average, with 97,000 puts and 7520 calls traded. Much of the put volume was due to one hefty spread trade, in which 39,500 September 58 puts were apparently bought on IYR for $2.08 and 39,500 September 50 puts sold for 76 cents. The spread, for a $1.32 net debit, appears to be a new position targeting a move to $50 or more through the expiration, which represents a 19.6 percent plunge through mid-September. A portfolio manager with substantial holdings in REITs and/or real estate companies might have initiated the bearish spread as a hedge.

Not Fighting the Tide 05-16-2012

jcusick — Wed, 16 May 2012 14:33:37

Cusick's Corner 05-16-2012
This trend down appears to still be in place and at this stage the risk aversion trade is on. The Bonds, TLT, have been very active, money has been flowing into US debt instruments. This is impacting the commodity markets heavily, especially Grains, DBC, and Metals, XME; any additional negative news out of the EU will only catalyze the safe haven trade. See you After Hours.

Stock market averages are holding modest gains on a relatively quiet morning of trading on Wall Street. Domestic economic news seemed mostly supportive of higher stock prices after a report showed Housing Starts up to an annual rate of 717,000 in April, from 699K last month and better than the 680K that was expected. Separately, it was reported that Industrial Production was up 1.1 percent in April and .6 percent better-than-expected. A lot of attention remains overseas and concerns about the state of the EU amid a political impasse in Greece. Trading was orderly today, however, with major equity markets across the Eurozone trading mixed. France's CAC 40 added .3 percent, but Germany's DAX slipped .3 percent. The euro is flat at 1.2728 against the dollar. Crude oil is off 97 cents to $93.01 and gold gave up another $14.4 to $1542.7 an ounce. However the Dow Jones Industrial Average is holding a 43-point midday gain and the NASDAQ added 6 points. CBOE Volatility Index (.VIX) is down .17 to 20.80. Trading in the options market is active and continues to reflect a cautious underlying tone, with approximately 4.2 million calls and 5.1 million puts traded across all the exchanges through 12:00pm ET.

Bullish Flow
Weatherford (WFT) is up 25 cents to $12.70 in active trading of 7.2 million shares after JP Morgan upgraded the stock to Overweight from Neutral. Meanwhile, 28,000 calls and 3,360 puts traded on the oil driller so far today. The largest trades (by number of contracts) so far are part of a spread, in which the investor apparently bought 7,300 June 15 calls on the stock at 18 cents per contract and sold 7,300 June 18 calls at 4 cents. The spread, for a 14-cent debit, has traded 10000X and seems to express the view that WFT might recapture $15 per share, or more, through the June expiration - which represents an 18.1 percent surge over the next 30 days. The stock has tumbled 27.2 percent over the past two months. The debit is at risk if the stock hold below $15 and the position is left open through the expiration.

Darden Restaurants (DRI) is up $4.07 to $55.58 on high volume of 4.1 million shares. The stock saw a midday spike to 52-week highs on no news, but heavy volume. 18,000 calls and 4,500 puts traded on the stock. May, June and July 55 calls, which are now 58-cents in-the-money, are the most actives in the name. High call and share volume seems to hint at some pending news or chatter in the name, but it is still unclear what is motivating the activity in DRI Wednesday morning.

Bearish Flow
Dell Computer (DELL) is down 8 cents to $15.26 and options volume on the computer-maker is running 2.5X the daily average. 23,000 puts and 6,700 calls traded on the stock so far. Most of the put volume is due to one spread trade, in which the investor apparently bought 10,000 June 15 puts on DELL for 50 cents and sold 10,000 June 14 puts at 23 cents. The spread, for a 27-cent net debit, seems to be a bearish view on the stock targeting a possible move to $14 through the June expiration, or an 8.3 percent slide over the next four and a half weeks. An investor might have initiated the spread as a hedge ahead of the company's earnings, which are due out next week (5/22).

Sara Lee (SLE) is up 12 cents to $21.21 and options order flow on the snack food company is somewhat unusual today, as some investors appear to be opening new positions in May 21 puts on the stock. The contract is 5.7 percent out-of-the-money and expires at the end of the week. 5,019 now traded and, with 94 percent trading at the ask and open interest of 2,040, opening buyers seem to be dominating the flow. It's unclear why players are placing short-term positions on SLE. The stock is down about 5 percent since earnings were reported two weeks ago. There hasn't been much news on the ticker since that time.

Unusual Volume
JC Penney (JCP) options volume is running 4X the (22-day) average, with 123,000 contracts traded and put volume accounting for 68 percent of the volume.

Gold Fields (GFI) options volume is 11.5X the average daily, with 57,000 contracts traded and call volume representing for 95 percent of the activity.

DELL options volume is running 2.5X the average daily, with 29,000 contracts traded and put volume accounting for 77 percent of the activity.

Increasing options activity is also being seen in Marvell Tech (MRVL), Kinross Gold (KGC), and Pepsico (PEP).

Implied Volatility Mover
JC Penney (JCP) is a big mover today after the retailer's earnings fell short of expectations. The stock is down $5.36 to $27.96 on volume of 26 million shares, which is roughly 10X the expected for midday action. Trading in the options market is very heavy as well. 44,000 calls and 89,000 puts traded on JC Penney so far. Some players might closing out winning positions in June 29 puts and May 28 puts, which are the most actives and are now in-the-money. Levels of implied volatility have eased 28 percent to 45 now that the earnings news is out.

A Technical Take 05-15-2012

jcusick — Tue, 15 May 2012 18:34:09

Cusick's Corner 05-15-2012
The good news -- the market firmed after a decent pullback. The not so good news -- we have broken enough levels of support and have not reached a level of Fear, VIX, where you might feel that the bull camp has much of a reason to challenge. Technically looking at cycle and trend indicator tools, i.e. CCI, there is a negative reading which confirms trend right now. The market is getting to a 20 high/low period CCI, a level to watch if a turn is potentially in the works. The CCI got to those levels at the beginning of the month which is where the market firmed and turned trend - it's a nice temperature gauge. See you Midday.

Stock market averages gave up midday gains and finished lower Tuesday. Economic data was in focus early after data showed Retail Sales up .1 percent in April, which was only slightly less than the .2 percent that was expected. The Consumer Price Index [CPI] was flat last month and in-line with economist forecasts. However, the NY Empire State Index, a gauge of regional manufacturing activity, rose to 17.1 in May, from only 6.6 and better than the 8.4 that was expected. NAHB's Homebuilder Sentiment Index was up to five-year high of 29 in May, from 25 last month and also much better than the 26 that was anticipated. Stock market averages ticked higher with help from the data into midday, but then another round of selling surfaced late in the day. Falling equity markets in Europe along with weakness in the euro seemed to weigh on sentiment in afternoon action. The euro traded down .7 percent to 1.273 as the political impasse in Greece is raising anxiety levels about the longer-term outlook for the country and the implications for other EU members. European equity markets fell again today. Spain's IBEX lost 1.6 percent and Italy's MIB Index fell 2.6 percent. Crude oil slipped $1.58 to $93.20 and gold also faced late-day selling pressure, losing $18.3 to $1542.7 an ounce. On Wall Street, the Dow finished off 63 points and the NASDAQ lost 8.8.

Bullish
Pfizer (PFE) was off 28 cents to $22.30 and one of 24 Dow stocks to finish with losses Tuesday. Options action on the pharmaceutical maker was interesting, as 94,000 calls and 24,000 puts traded in PFE options. The top trades were part of a spread, in which the investor sold 15,000 June 23 calls on the stock at 22 cents and bought 15,000 September 23 calls for 68 cents. This Jun - Sep 23 call calendar spread, for a 46-cent debit, traded 25000X on the day and data from the options exchange indicate that both legs of the spread were opening trades. If so, the strategist possibly has a bullish view on the stock through September and is buying upside $23 calls, but they don't expect the stock to move beyond that 23 level (+3.1 percent) through the June expiration (31 days). The stock recorded a 52-week high of $23.3 on April 27 and has seen whippy action since that time. Earnings were last reported on May 1.

Bullish trading was also seen in Morgan Stanley (MS), Pandora Media (P), and Renren (RENN).

Bearish
Kohl's (KSS) shares lost 36 cents to $46.90 and extended a losing streak to four days and almost 8 percent. Options on the retailer were actively traded and seemed to reflect concerns about additional losses. 13,000 puts and 2,190 calls traded on Kohl's Tuesday. May 46 puts, which are 1.9 percent out-of-the-money and expiring at the end of the week, were the most actives. 6,350 traded and, with 80 percent of the trading activity hitting at the offer, it appears that buyers were initiating the trades. May 47 and October 44 puts were also busy. The bearish trading in Kohl's surfaced today ahead of earnings from peer JC Penney (JCP), which is down 14 percent in extended hours trading on disappointing results. Another name in the space, Target (TGT), reports tomorrow morning.

Bearish trading was also seen in Joy Global (JOY), Nordstrom (JWN), and Lowe's (LOW).

Index Trading
Trading was busy in the S&P 500 Index (.SPX) pit for a second day. 700,000 puts and 268,000 calls traded on the S&P 500 yesterday, which was the third highest put volume day for the product so far in 2012. The action continued today. The S&P 500 lost 7.69 points to 1,330.66 and options volume was 645,000 puts and 280,000 calls. Some players are likely closing out positions ahead of the May expiration. Others are likely opening new positions to hedge stock portfolios from the risk of further losses. June 1275 puts and May 1300 puts were the most active S&P 500 index options. Meanwhile, CBOE Volatility Index (.VIX), which tracks the expected volatility priced into S&P 500 options, ticked up .10 to 21.97 to record its highest close since mid-January.

ETF Action
Options action is picking up in the ProShares UltraShort Euro Fund (EUO). The fund, which is a leveraged play on the (inverse) of the EUR/USD currency pair, gained 35 cents to $20.78 on heavy volume of 4.2 million shares. EUO has surged 8.2 percent so far in May and is at its highest levels since mid-Jan. Some players in the options market seem to be anticipating additional euro weakness, as 11,000 calls and 860 puts traded on EUO today. May 20 and 21 calls were the most actives. Since EUO moves inverse to the EUR/USD currency pair, buying calls on the fund represents a bearish bet on the European currency. Important Information: Inverse ETFs are designed to achieve their investment objective on a daily basis are not designed to track the underlying index or benchmark over a longer period of time. Inverse and leveraged ETFs that are reset daily are unsuitable for investors who plan to hold these products for longer than one trading session. Over longer periods of time, leveraged and inverse ETF performance can differ significantly from their daily objective due to the effects of compounding.

Retail Number Solid 05-15-2012

jcusick — Tue, 15 May 2012 14:50:11

Cusick's Corner 05-15-2012
Retail Sales came in strong when you strip out the auto sales component which catalyzed the sector, XRT/XLY are leading the push to the upside and are outpacing the overall market by almost 3X. The action in Crude, USO, is less bullish; support has been broken, 36.40 on USO, and is now solid resistance. If the Dollar picks up any strength then this could potentially catalyze the downside pressure.

Stock market averages are holding modest gains with help from economic data Tuesday. The underlying tone of trading remained cautious early amid headlines about the ongoing political impasse in Greece. The news is weighing on European equity markets again today. Spain's IBEX lost 1.6 percent and Italy's MIB Index fell 2.6 percent. Positive domestic economic data helped to offset some of the worries about the unfolding debt crisis in Europe. Data released early showed Retail Sales up .1 percent in April, which was only slightly less than the .2 percent that was expected. The Consumer Price Index [CPI] was flat last month and in-line with economist forecasts. However, the NY Empire State Index, a gauge of regional manufacturing activity, rose to 17.1 in May, from only 6.6 and better than the 8.4 that was expected. NAHB's Homebuilder Sentiment Index was up to five-year high of 29 in May, from 25 last month and also much better than the 26 that was anticipated. Meanwhile, crude oil slipped another 27 cents to $94.51 and gold edged down $3.4 to $1557.6. However the Dow Jones Industrial Average shook off morning weakness and is up 51 points. The NASDAQ added 25. CBOE Volatility Index (.VIX) is down .92 to 20.95. Trading in the options market is active and continues to reflect a cautious underlying tone, with approximately 3.8 million calls and 4.2 million puts traded across all the exchanges through 12:00pm ET.

Bullish Flow
Pandora Media (P) is seeing strength and active trading Tuesday. The stock is up 69 cents to $10.51 in brisk trading of 3 million shares and has now jumped 21.6 percent over the past six trading sessions. Meanwhile, call volume is outpacing put volume in Pandora ten-to-one. Roughly 22,000 calls and 2,200 puts traded on the stock so far. June 11 calls, which are now 4.7 percent out-of-the-money and expiring in 34 days, are the most actives. 7,310 traded. May 9, May 11, Jun 9, Jun 10 and Jun 12 calls are seeing interest as well and levels of implied volatility have moved up 3 percent to 89. Prior to the recent rally, Pandora had suffered a two-month slide and lost nearly 40 percent. Some players in the options market are possibly taking positions in call options on the view the stock will continue to recover some of the losses in the days/weeks ahead. May options expire at the end of this week. The company will report earnings on May 23, which is outside of the May expiration.

Renren (RENN), a Chinese Internet company, is up 56 cents to $6.05 in active trading of 13 million shares and options on the stock are busy today after the company reported earnings and revenues that beat analyst estimates. 18,000 calls and 5,080 puts traded on Renren so far. Some investors are possibly looking for the rally to continue through the rest of the week, as May 6 and 7 calls are the most actives in RENN today.

Bearish Flow
Lowe's (LOW) loses 23 cents to $29.33 in active trading of 14 million shares and options order flow on the home improvement retailer includes 12,000 puts and 2,600 calls through midday. The stock fell in sympathy with Home Depot (HD), which is down 1.7 percent and the Dow's biggest losers on earnings news. Lowe's is due to report earnings on May 21 and it seems that some players in the options market are turning cautious ahead of the results. 14,000 calls and 25,000 puts traded in Lowe's already today, which is 4.5X the daily average. October 30 puts and calls are the most actives. May 28, 29 and 30 calls, which expire before Lowe's reports earnings, are busy as well.

Joy Global (JOY), a Milwaukee, WI farm and construction machinery company, is down $1.56 to $62.11 in active trading of 1.3 million shares and has now suffered a 32.3 percent slide since February 28. Some investors seem concerned about the risks of further losses in JOY shares, as 13,000 puts and 2,800 calls have traded on the stock so far today. July 57.5 and 65 puts are the most actives. The company is due to report earnings on May 31.

Unusual Volume
PowerShares Bullish Dollar Fund (UUP) options volume is running 36X the (22-day) average, with 133,000 contracts traded and call volume accounting for 99 percent of the volume.

Groupon (GRPN) options volume is 3X the average daily, with 91,000 contracts traded and call volume representing for 50 percent of the activity.

Home Depot (HD) options volume is running 3X the average daily, with 64,000 contracts traded and put volume accounting for 64 percent of the activity.

Increasing options activity is also being seen in Pandora Media (P), iStar Financial (SFI), and iShares Japan Fund (EWJ)

Implied Volatility Mover
Groupon (GRPN) is up $1.44 to $13.18 in very brisk trading of 16 million shares after the company reported earnings after the closing bell yesterday. Options volume is interesting, as 50,000 calls and 50,000 puts have traded on the stock through midday, which is 3.5X the daily volume. Players in the options market are jockeying for position in anticipation of the stock's next short-term move, as May 13 puts and 14 calls are the most actives in GRPN today. Others might be selling premium on the heels of the post-earnings rally and implied volatility in the options on the stock is down 31 percent to 99.

Bucking Trend 05-10-2012

jcusick — Thu, 10 May 2012 19:16:42

Cusick's Corner
Lately I have been reading more about the US Dollar and there's an interesting dynamic potentially setting up. The Dollar has shown strength, it had a decent rally over the last month, UUP +1.8%, and when you look at a chart, there is a potential double bottom breakout getting close to confirmation, which would be a break above the March highs. This is important for two main reasons: potentially lower commodity prices, DBC, and could be a plus for the desire of domestic Equities. Keep an eye on the Dollar trade. See you Midday.

Market action was mixed Thursday. A day of strength across European equity markets helped set the table for steady trading on Wall Street. Spain's IBEX jumped 3.4 percent to help pace the advance on hopes Greece is forming a new government that will ensure that the troubled nation will remain as an EU country. The domestic economic news disappointed, however. Data released early showed jobless claims falling by 1,000 to 367,000 last week. Economists were expecting 365K. The Trade Deficit widened to $51.8 billion in March, from $45.4 billion the month before and worse than the $50.2 billion that was expected. The big deficit reflects the weaker economic conditions in the US. Still, with market averages holding gains across the Eurozone, decreasing concerns about the debt crisis seems to keep a floor under stock market averages. At the closing bell, the Dow Jones Industrial Average was up 20 points. The tech-heavy NASDAQ was weighed down by a 10.5 percent post-earnings loss in Cisco and lost 1-point.

Bullish
AIG adds 41 cents to $32.24 through late-day trading Thursday and is attempting to recover some of the losses from the week before. Shares fell 5.5 percent Thursday and Friday on earnings news and then lost another 3.4 percent Monday and Tuesday of this week. The stock has since rebounded 1.7 percent and the options action is interesting, as 82,000 calls and 16,000 puts traded on AIG today. The top trades are part of a spread, in which the investor apparently sold 36,800 August 35 calls on AIG at $1.15 to buy 18,400 November 35 calls for $2.34, paying 4 cents for the 1X2 call calendar spread. AIG August 35 calls saw a flurry of buying activity in late-April on reports banks might start bidding for the company's assets. However, the rally ran out of steam and then the stock fell on earnings news last week. Today's spread trader is possibly adjusting a position and giving the bullish trade more time to play out. They are buying half as many November 35 calls and paying about double the premium. The net result is a small debit paid for the 1X2 call ratio spread.

Bullish trading was also seen in USG, MetroPCS (PCS), and Heinz (HNZ).

Bearish
Paccar (PCAR) came under fire Thursday afternoon and is down $1.02 to $39.46 on high volume of 8.2 million shares on reports the SEC is investigating the company's financials from 2008 to 2011. Options on the stock are actively traded as well. 8,680 puts and 2,500 calls so far. May 39.3 puts, which have an unusual strike price due a contract adjustment after a 70-cent dividend was paid in January, are the most actives. 4,290 traded. May 38.3 and 40.3 puts are seeing interest as well. Levels of implied volatility in PCAR options is up 38 percent to 42.5, as some investors are possibly buying puts to hedge stock from the risk of additional fallout related to the SEC investigation.

Bearish trading was also seen in Windstream (WIN), Chiquita Brands (CQB), and Magnum Hunter Resources (MHR).

Index Trading
The overall action in the index market seemed to reflect the diminishing concerns about the European debt crisis, which had triggered a bit of volatility through midweek and sent CBOE Volatility Index (.VIX) to a morning high of 21.79 Wednesday. VIX slipped 1.05 to 19.03 today and is off 12.5 percent from yesterday's highs after the S&P 500 traded steady and added 3.41 points to 1,357.99. Despite the market's wild intraday swings Tuesday and Wednesday, the average daily move in the S&P 500 so far this week is just 4.7 points. The small daily moves stand in stark contrast to the chaotic scene in the fall 2011 when 20+ point moves in the S&P 500 were not uncommon through August and September. VIX hit a high of 45.45 on October 3 and the fact that it is near 19 today reflects the decline in actual volatility seen since that time.

ETF Action
iShares Japan Fund (EWJ) sees a second day of high call volume. As noted yesterday, 100,000 September 10 calls traded on the stock an average of 13 cents per contract yesterday. Open interest data today confirm that positions were being bought to open. Shares are up 4 cents to $9.36 today and another 115,000 traded for an average of 13.4 cents against 127,595 in open interest, which is by far the largest position in the product. EWJ holds leading companies from the Tokyo Stock Exchange and is down a little more than 4 percent since April 26. The Sep 10 calls that were purchased today and yesterday might express confidence that Asia's biggest equity market will rebound in the months ahead.

Tricky Times 05-10-2012

jcusick — Thu, 10 May 2012 13:58:44

Cusick's Corner 05-10-2012
The breaking of mid-term support earlier in the week was viewed negatively but as the week has progressed, we have seen that the Bears, while grasping at the horns, have not been able to wrestle the Bulls down (ok, enough with the pathetic analogies). So with the Dollar flat, UUP, Equities in the green, SPY, and Bonds down, TLT, I am expecting a potentially tight-ranged, choppy market into the After Hours. At some point soon the market and traders might want to see a bounce, 1367 on the S&Ps, while a break below support, 1340 on the S&Ps, could shake the current stability in the market. See you After Hours.

Market action is mixed through midday. Gains across European equity markets helped set the table for steady trading on Wall Street. Spain's IBEX rallied 3.4 percent to help pace the advance on hopes Greece is forming a new government that will ensure that the troubled nation will remain in the euro area. The domestic economic news was mixed. Data released early showed jobless claims falling by 1,000 to 367,000 last week. Economists were expecting 365K. Another report showed Exports increasing by 7 percent in the past twelve months and imports at a robust rate of 8.4 percent. However, the Trade Deficit widened to $51.8 billion in March, from $45.4 billion the month before and worse than the $50.2 billion that was expected. The big deficit reflects the weaker economic conditions in the US. Still, with market averages holding gains across the Eurozone, decreasing concerns about the debt crisis seems to be the primary driver of market action today. Crude oil has added 22 cents to $97.03 per barrel and gold gained $1.3 to $1595.5 an ounce. The Dow Jones Industrial Average is up 35 points, but the tech-heavy NASDAQ lost 9. CBOE Volatility Index (.VIX) gave back .46 to 19.42. Options volume is slowing from the frantic pace seen Wednesday, with approximately 3.2 million calls and 2.9 million puts traded across all the exchanges through 11:30am ET.

Bullish Flow
Cisco Systems (CSCO) is down 10.3 percent to $16.85 and easily the biggest loser in the Dow Jones Industrial Average after the networking giant reported earnings late-yesterday. Investors seemed disappointed with the forward-looking sales guidance. CSCO is down on very heavy turnover of 120 million shares and weighing on both the Dow and the tech-heavy NASDAQ through midday. Meanwhile, 587,000 options contracts traded on Cisco already today, which is 6X the daily average. Not all of the flow is bearish, however. In fact, the top trades are part of a "risk-reversal", in which the investor apparently sold 47,000 October 16 puts on Cisco at 77 cents per contract to buy 47,000 October 19 calls for 54 cents. The combo, at a 23-cent net credit, appears to be a new position. If so, the investor is probably a willing buyer of the stock at $16 per share, but is also buying upside calls for bullish exposure and positioning for a substantial rebound in the stock from now through mid-October.

USG has added 13 cents to $17.16 and more than 10,000 May 17 calls have traded on the Chicago, IL building and construction materials company. The activity has been mostly smaller sizes. The top trade is a 343 May 17 calls for $1.10 per contract. May 17 call options on USG are 16 cents in-the-money and expiring at the end of next week. It's not clear what is driving the action because there are no headlines on the ticker, but it seems to opening activity. Open interest in the contract is 4,612. Earnings were last reported on April 17.

Bearish Flow
Avon Products (AVP) is off 76 cents to $20.84 in heavy trading of 16.5 million shares after Coty Inc raised its takeover offer for the company to $24.75 per share. The stock is down, as AVP has previously rejected the hostile bid and Coty said it will walk away from the proposal if there is no agreement by Monday. The weakness in the stock today might reflect diminishing expectations for a buyout. The original proposal, which was rejected, was for $23.25. Meanwhile, the top options trade on the stock today is a July 23 - 25 call spread, sold at 47 cents, 4250X and is possibly a closing trade. That is, maybe the investor had opened a bullish Jul 23 - 25 call spread in anticipation of a higher takeover offer, but is closing out the position on the news today.

Powershares QQQ (QQQ) is off 16 cents to $64.16 on the heels of Cisco's disappointing revenue guidance and a noteworthy spread traded on the fund, which holds the top 100 non-financial names from the NASDAQ. In morning trading, one investor bought 30,000 August 56 puts on the Qs for 79 cents and sold 30,000 August 50 put at 29 cents. The Aug 50 - 56 put spread, for a 50-cent debit, might have been initiated to hedge the risk of additional losses in the tech-heavy NASDAQ. The best payoff happens if shares tumble to $50 (-22%) or less through the August expiration.

Unusual Volume
Cisco Systems (CSCO) options volume is running 5.5X the (22-day) average, with 554,000 contracts traded and call volume accounting for 54 percent of the volume.

MetroPCS (PCS) options volume is 32X the average daily, with 92,000 contracts traded and call volume representing for 67 percent of the activity.

Avon Products (AVP) options volume is running 3.5X the average daily, with 78,000 contracts traded and call volume accounting for 61 percent of the activity.

Increasing options activity is also being seen in TEVA, Salesforce.com (CRM), and TEVA.

Implied Volatility Mover
Implied volatility in the options on Windstream (WIN) is moving higher. Shares of the Little Rock, AR communications and technology company are down $1.20 to $10.06 on heavy volume after the company reported earnings that fell short of expectations. 17,000 puts and 6,500 calls traded in WIN, which is more than 30X the daily average. Meanwhile, implied volatility, which typically moves lower after a company releases its earnings report, is up 30 percent to 30. The fact that IV is moving higher after earnings seems to suggest that there was something in the report that triggered concerns about additional losses in the underlying stock. The high levels of put activity may be expressing bearish sentiment and the risk that WIN might lose in the weeks ahead.

Bear Trying to Grab the Bull by the Horns? 05-09-2012

jcusick — Wed, 09 May 2012 18:56:14

Cusick's Corner
Today's intraday reversal held up well and gave short-term longs some breathing room into the After Hours. I will be watching to see if the longs start to sell into strength since we are at mid-term support and there's not a ton of conviction. I would also be careful of bottom picking at this stage -- leave that one to the proctologists. Markets can stay overbought, especially if the mid-term trading range does establish a true bearish sentiment. Additionally, EU stocks are still performing quite poorly so keep an eye on them, they have been trending with the US equities and if they continue to trade poorly then it is going to be hard to see short-/mid-term support for big upside. See you Midday.

Stock market averages opened lower, but recovered much of the morning losses and are drifting higher into midday. Another round of losses across the Eurozone set the table for morning volatility on Wall Street after Spain's IBEX fell 2.2 percent and Italy's MIB Index lost 1.1 percent. The concerns are the same. Namely, investors are worried that recent elections in Greece will undermine efforts to solve the country's ongoing fiscal crisis. The debt crisis threatens the banking system and economic activity in the region, which in turn can weigh on global economic activity and corporate profits in America.

Bullish
Cisco (CSCO) is seeing high volume ahead of earnings. The networking giant is due to release a quarterly profit report after the closing bell today. The largest trade, by number of contracts, in Cisco is an 8,000-contract block of Weekly $19 calls for 45 cents per contract. Shares closed up 7 cents to $18.78 and an investor might have bought the block to lock in the right to buy the stock for $19 per share, or 1.2 percent above current levels, through the remainder of the week. If the report is bullish and lifts shares beyond $19, they can exercise their right to call the stock and take ownership (100 shares per call option bought) for $19 per share. If the stock falls on the news, stays below $19 through the expiration, and the position is left open, the contract will expire worthless and the debit paid is lost. Of course, the position can be closed out for a profit or loss at any time prior to the expiration through an offsetting trade. More than 25,000 of these Weekly $19 calls on Cisco have changed hands today.

Bullish trading was also seen in Barrick Gold (ABX), MetroPCS (PCS), and OfficeMax (OMX).

Bearish
Capital One (COF) closed 54 cents lower to $53.53 and today's options volume of 15,500 contracts is 2.5X the daily average for the name. Most of the volume is in the September 49 puts on the credit card company. The largest trade is a 1000-lot for $2.64 when the market was $2.58 to $2.64. It appears that a buyer initiated the trade. 8,275 Sep 49 puts have now traded on Capital One and levels of implied volatility are moving up 3 percent to 30.5. Shares performed well in the first few months of the year and touched 52-week highs in late-March. The stock is down 6.6 percent since that time and some investors might be buying downside September puts today against stock positions to help protect gains, or hedge risk, of further losses in the months ahead.

Bearish trading was also seen in Annaly Capital (NLY), Hertz (HTZ), and Dick's Sporting Goods (DKS).

Index Trading
CBOE Volatility Index (.VIX) sees another spike in early trading. The market's so-called "fear gauge", which tracks the expected volatility priced into S&P 500 options, jumped to 20.65 in morning action, but erased some of those gains and added 1.03 to finish 20.08 on the day. The index hit a morning high of 21.79 Wednesday morning, but has since given most of the gains and is up just .42 to 19.42. Trading in the VIX pit seems to be picking up a bit due to the gyrations. 214,000 calls and 126,000 puts traded on the index so far. July 40 calls are the most actives. 21,300 traded, as some investors might be taking position in July upside calls on concerns that events overseas will trigger another spike in market volatility heading into the summer months.

ETF Action
iShares Japan Fund (EWJ) closed off 8 cents to $9.32 and interesting options trades on the exchange-traded fund today include a buyer of 50,000 September 10 calls on the AMEX. A source at the exchange confirms that the block was bought. 100,000 contracts now traded at an average of 13 cents per contract and appears to be opening activity. EWJ, which holds leading companies from the Tokyo Stock Exchange, has been reeling lately and is down 4.4 percent since April 26. Today's hefty call purchase might express confidence that the market will rebound in the months ahead.

Market Recovers, Dollar Holds 05-09-2012

jcusick — Wed, 09 May 2012 15:08:27

Cusick's Corner 05-09-2012
I will be continuing to monitor the Euro Currency, FXE, as a flag of any continuation to the downside. As we head into the Midday, it has broken the lower tail of the recent downside action which at this stage is not great for the prognosis of a sustained upside move. This downward move in the Euro also comes after the Equities have popped of their worst levels, S&Ps unchanged, but the US Dollar continues to surge, UUP +.32%, which pressures not just Equities but the Commodities, JJG & USO -1%. I mentioned the Retail sector on Monday -- watch earnings for PCLN, there is an expected move into the number $55 and it will be interesting to see what happens after a very active week in the stock. See you After Hours.

Global equity markets remain under pressure Wednesday, but the Dow Jones Industrial Average is well off session lows through mid-morning. Steep losses across the Eurozone amid worries about Greece set the table for the morning slide on Wall Street. Spain's IBEX is off 3.2 percent and Italy's MIB Index lost 2.1 percent. There are concerns that recent elections in Greece will undermine efforts to solve the country's ongoing fiscal crisis. Investors are worried about the European banking system and further economic weakening in the region, which is an important trading partner to the US. Yet, while The Dow Jones Industrial Average suffered another triple-digit loss in morning trading, like yesterday, the losses have since been pared. The Dow Jones Industrial Average is now down 73 points and 110 points from session lows. The NASDAQ lost 13 points. Crude oil slid 90 cents to $96.11 per barrel and gold tumbled $16.5 to $1,588 an ounce. CBOE Volatility Index (.VIX) is up .85 to 19.90, but well off session highs of 21.79. Trading in the options market is very active and reflects the cautious underlying tone, with approximately 3.6 million calls and 4.3 million puts traded across all the exchanges through 11:20am ET.

Bullish Flow
Barrick Gold (ABX) fell to 52-week lows of $35.61 early today, but then saw an impressive morning turnaround and is now up $1.28 to $38 on heavy volume of 7 million shares. The gains in the miner come despite another day of losses for gold. The yellow metal was recently down $13 to $1591.50 an ounce. Still, ABX is rallying in active trading and options action is picking up as well. 40,000 calls and 11,000 puts traded on the stock. The top trade is a July 40 - 44 call spread, traded for 79 cents, 2500X. In this spread, the investor apparently bought 2,500 July 40 calls on the stock for $1.23 and sold 2,500 July 44 calls at 44 cents. The position sets up a bullish spread with a maximum payout if the stock rallies to $44 (+15.8%) or more through the July expiration.

Homebuilder Toll Brothers (TOL) has added 8 cents to $26.16 and options volume on the stock is running 2.5X the daily average. 7,440 calls and 290 puts have traded in the name so far. May 25 calls, which are $1.16 in-the-money, are the most actives. 5,470 contracts changed hands. May 26 calls are seeing interest as well. Increased options action in TOL comes as the company is presenting today at a Wells Fargo Industrial and Construction Conference.

Bearish Flow
Eight of the ten most active options contacts in the first ninety minutes of trading Wednesday are put options on the SPDR 500 Trust. Trading under the ticker SPY, the so-called "SPYders" is an exchange-traded fund that holds the S&P 500 names. Investors can buy and sell shares throughout the trading day like shares of stock. Options on the ETF are very heavily traded as well. SPY shares are down 69 cents to $135.85 and June 130 puts are the day's most actives in the ETF. Volume is approaching 100,000 contracts. Since SPY is a proxy for the stock market, some investors are probably buying downside puts on the fund to help protect or hedge stock portfolios from the risk of further market losses. June 134, May 130, and May 135 puts on SPY are among the day's most actives as well.

A large block of puts trades on the US Oil Fund (USO) ahead of weekly inventory data. USO is an ETF that tracks the commodity through futures contracts. Shares are down 31 cents to $36.56 and have now suffered a six-day 9 percent losing skid. In morning options action, one investor bought a 21,000-contract block of June 36 puts on USO for $1.18 per contract. The hefty premium purchase seems to reflect concerns about the risk of additional losses for crude oil in the weeks ahead. However, USO has strengthened a bit in late-morning trading on the heels of weekly inventory data. The market on the June 36 put is $1.03 to $1.04. So the timing of the hefty put purchase was not so good so far.

Unusual Volume
Yahoo (YHOO) options volume is running 2X the (22-day) average, with 111,000 contracts traded and call volume accounting for 80 percent of the volume.

Disney (DIS) options volume is 3X the average daily, with 58,000 contracts traded and call volume representing for 62 percent of the activity.

Watson Pharmaceuticals (WPI) options volume is running 2.5X the average daily, with 32,000 contracts traded and call volume accounting for 85 percent of the activity.

Increasing options activity is also being seen in SodaStream (SODA), NetApp (NTAP), and Lennar (LEN).

Implied Volatility Mover
Disney (DIS) shares are up 1.9 percent to $45.16 and one of only three Dow stocks in positive territory Wednesday morning. Shares of the media company are trading at 52-week highs after earnings were reported late-Tuesday. Options on the stock are busy as well. 36,000 calls and 22,000 puts so far. May and June 36 calls are the most actives in Disney today. Some investors might be liquidating positions on the news, as more than half the volume traded on the bid. Meanwhile, levels of volatility have eased 23 percent to 21, but remain well above the 2012 low of only 16 set in mid-March.