Market Sentiment

Stocks slumped on mixed jobs data and renewed worries about European debt problems Friday. Market action in the best stock picks was sluggish early after the Labor Department reported that the U.S. economy added 103,000 jobs in December, which was considerably less than the 150,000 increase that economists had expected. However, November numbers were revised up and the unemployment rate fell to 9.4% from 9.8%. Economists were looking for a decline to 9.7%. However, after steady trading at the open, the major averages followed the euro lower through midday. The European currency dipped below 1.28 against the buck after rising yields of Portuguese bonds rekindled worries about the debt crisis. The decline was orderly, however, and the situation had stabilized heading into the final hour. The Dow Jones Industrial Average is down 35 points and 62 points off session lows (11,600). The NASDAQ lost 12. The CBOE Volatility Index (.VIX) is flat at 17.40. Trading in the options market remains active with 8.8 million calls and 7.6 million puts traded with one hour to go in the day’s trading.

Bullish Flow

Big print in Intel (NASDAQ: INTC) after an investor buys 32,700 INTC Jan 21 Calls at .30 cents each. Total of 119,000 traded versus 105,000 in open interest. Shares are off .14 cents to $20.63 and today’s call buyers might have their sights set on earnings, due Jan. 13 (after the market close). Shares fell 2.7% after earnings were last reported on Oct. 13, but are up 7.2% since that time (however, down 5.8% since Dec. 10).

Human Genome Sciences (NASDAQ: HGSI) sees a morning spike and is trading up .44 cents to $25.26 on news the company’s CEO bought 60,000 shares at $24.16 on Jan. 5. The purchase comes ahead of a presentation at an annual confab conference Jan. 10 – 13. Meanwhile, 9810 calls and 660 puts traded in HGSI. The HGSI Jan 26 Calls are the most active with 2527 traded (72% on the ask price), and the Jan 25 and 27 calls are seeing interest as well. Implied volatility is up to 40 from 37 yesterday. The company is still awaiting a final FDA decision regarding its Benlysta lupus drug. It was recently postponed to March from late-December.

Bearish Flow

Supervalu (NYSE: SVU) is falling to session lows in volatile trading Friday morning. Shares are off .54 cents to $8.66 and recent trades include lots of Jan 7.5 puts at the .15-cent ask price. With hour to go, 15,400 traded. The action comes after the company announced the departure of a Chain Services COO and after Susquehanna cut its price target on the stock this morning.

Implied Volatility Mover

Norfolk Southern (NYSE: NSC) with relative strength and increasing call activity Friday. Shares notched a new 52-week high and are up $1.05 to $64.85. Now 11,000 calls and 2,000 puts traded on the railroad operator. The action includes a multi-exchange sweep of 7445 NSC Mar 70 Calls at .80 cents when the market was .70 to .80 cents. Now 7984 traded versus 1,145 in open interest. NSC Feb 65 Calls are seeing interest as well and might be closing trades after today’s run higher. Implied volatility is up 4.5% to 24.5, with earnings slated for Jan 25 (after market close).

Unusual Volume Movers

Bearish activity detected in PowerShares QQQ Trust (NASDAQ: QQQQ), with 521,951 puts trading, or three times the recent average daily put volume.

Bullish flow detected in Canadian Natural Resources (NYSE: CNQ), with 29,047 calls trading, or 21 times the recent average daily call volume.

Bearish activity detected in iShares S&P GSCI Commodity Indexed Trust (NYSE: GSG), with 5812 puts trading, or 224 times the recent average daily put volume.

Increasing volume was also seen in AMR Corp. (NYSE: AMR), MGM Resorts Intl. (NYSE: MGM), and American International Group (NYSE: AIG).

How we interpret:
Sophisticated real-time tools created by TradeAlert for institutional traders are used to provide indication of buyer and seller, opening trades, greeks, and more. In conjunction with our market expertise, historical data and a network of brokers and market participants we are able to clarify what’s trading and explain the potential motivation behind activity clearly and accurately.

This article is by Frederic Ruffy, 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.