Market Rebounds With Strong Options Volume

Advertisement

Your daily options trading wrap up.

Sentiment

Stocks are broadly higher, as some of the focus shifted to domestic economic news Thursday and away from the troubling events overseas. Jobs were in focus early after the Labor Department said that jobless claims fell by 16,000 to 385,000 last week, which was in-line with expectations. However, continuing claims, at 3.7 million, was a bit better-than-expected. The CPI rose .5% and industrial production edged down .1% in February. Economists were looking for a .4% increase in the CPI and .6% gain in industrial production. The list of leading indicators, at .8%, was also short of the 1% that was expected. However, the Philadelphia Fed Survey surged to 43.4 in March, from 35.9 last month. Economists were looking for a decline to 28.1. What! The mixed economic news, along with solid gains from European stock benchmarks, helped to set a positive tone on Wall Street. At the very least, the data seem to have shifted some of the focus off the nuke crisis, escalating tensions in Middle East – North Africa, and the ongoing European debt problems. Heading into the final hour, the Dow Jones Industrial Average is up 143 points and the tech-heavy NASDAQ gained 23.

Bullish Flow

After spiking to 1.17 yesterday, and its best levels since July, the total put-to-call ratio has eased back to .62 Thursday. With an hour left to trade, 13.2 million calls and 8.2 million puts have traded across the options exchanges. However, not only is the options expiration driving a lot of the action, but heavy ex-dividend in a number of exchange-traded funds is distorting the ratio. 693,000 calls traded in the SPDR Financial ETF (NYSE: XLF) alone. Traders also crawling all over these SPDRs, much related to dividends – Energy Select Sector (NYSE: XLE), Technology (NYSE: XLK), and Industrials (NYSE: XLI). 7.6 million call options traded across all the exchange-traded funds, or three times the normal. The equity-only put-to-call ratio is .75.

CBOE Volatility Index (CBOE: VIX) is down 2.87 to 26.53, as anxiety levels are easing today. Still, the market’s fear gauge is up 32.2% on the week and reflects the added earnings uncertainty due to recent events overseas.

Apple Computer (NASDAQ: AAPL) adds $7 to $337.01 and AAPL Mar 340 Call is the most actively traded equity option contract in the first 20 minutes of trading Thursday. Shares had suffered a two-day 6.7% slide prior today, down $30 since March 3, and some investors might be taking positions in anticipation of a rebound before the March expiration. 13,000 of the March 340 calls traded. The contract is $3, or .9% out-of-the-money, with a delta of .33. The market is $1.58 to $1.61.

Find more option analysis and trading ideas at Option Trading Strategies.

Bearish Flow

Lorillard (NYSE: LO) saw a spike to $83.25 after the FDA posted documents from an FDA subcommittee related to menthol. Shares gave back most of the gains and are trading up 17 cents to $78.51. Options trading is brisk, with 21,000 calls and 38,000 puts traded in the name. LO April 75 Puts have traded 6160 contracts and might be seeing some liquidating trades on the news. Implied volatility is down 16% to 59. Mar 72.5, April 60 and April 80 puts are the next most actives. April 90 and Mar 85s are the most active call options.

Implied Volatility Mover

China Integrated Energy (NASDAQ: CBEH), an oil and gas refiner, is down 24.4% to $3.78 after a law firm alleged overpayment and third party transactions in an M&A deal. Shares fell 16% Wednesday and are reeling again today. The company also reported earnings after the close yesterday and, although the initial reaction was positive, CBEH is now near session and 52-week lows. Options volume is 9,445 puts and 1,255 calls. CBEH Sep 2.5 Puts, which have traded 2,915 contracts (65% on the Ask), are the most actives and appear to be seeing fresh buying interest. Mar 5, Apr 2.5, Apr 5 and Jun 2.5 puts are seeing action as well. Implied volatility is down 26% after earnings, but remains elevated at 195.

 

Frederic Ruffy is the Senior Options Strategist at Whatstrading.com, a site dedicated to helping traders make sense of the complex and fragmented nature of listed options trading.


Article printed from InvestorPlace Media, https://investorplace.com/2011/03/apple-market-rebound-with-strong-options-volume-aapl-xlf-xle-xlk-vix/.

©2024 InvestorPlace Media, LLC