Market Sentiment
Stocks battled back from morning weakness and are trading mixed late Monday. With no earnings or economic news to guide the morning action, the focus was on overseas events. Stock market averages were lower across the Eurozone as reports the European Central Bank was buying Portuguese bonds to give the indebted country a lifeline. Meanwhile, some pre-earnings jitters are setting in. Alcoa (NYSE: AA) unofficially kicks off the reporting season after the bell, but the reporting season doesn’t get into full swing for another week or two. The Dow Jones Industrial Average is down 33 points an hour before the close, but the tech-heavy NASDAQ has battled back to positive territory and is now up 6 points. The CBOE Volatility Index (.VIX) is up .54 to 17.68. Trading in the options market is active, with about 6.2 million calls and 4.9 million puts traded so far.
Bullish Flow
With an hour of trading to go, Verizon (NYSE: VZ) adds 8 cents to $38. Options volume is two and half times the average daily, with 73,000 calls and 40,000 puts traded on the wireless provider. VZ January 37 Calls are the most active with 17,840 traded (25% on the bid and 58% on the ask) versus 13,360 in open interest. The heightened activity is probably in reaction to news that Verizon will begin to offer iPhone on the Verizon network.
Intel (NASDAQ: INTC) adds 2 cents to $20.68 and the top options trades in the chipmaker today are a INTC Jan 21 – 22.5 (1X2) call ratio spread at 26.5 cents, 5000 times on the International Stock Exchange (ISE). It also traded another 3,479 times at 26.5 cents, also on the ISE, and might be a bullish trade in anticipation of earnings, January 13 (after the market close). The Jan 22.5s have now traded 26,750 times while volume in the Jan 21s is approaching 20,000.
Bearish Flow
Big Prints in the iShares MSCI Emerging Markets Index (NYSE: EEM) after an investor initiates an Feb 42 – 46 (1.5 X 1) put ratio spread at 73 cents, 30,000 times. They paid $1.21 for the 46s and collected 32 cents on the 42s (45,000 times) and are probably setting up a short-term hedge (or possibly rolling down in strike prices).
Implied Volatility Mover
The EEM trade above makes it today’s IV mover.
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.
