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Market Sentiment

Stocks are broadly lower after a rally in crude oil prices overshadowed better-than-expected economic data. The Dow Jones Industrial Average opened steady Friday after a 191-point rally Thursday and after the Labor Department said the U.S. economy added 192,000 jobs in February, 7,000 better-than-expected. February numbers were also revised higher and the unemployment rate fell to 8.9%. A separate report released later showed January Factory Orders up 3.1%. Economists were looking for an increase of 2.1%. Yet, a weak rally attempt was thwarted in morning trading after crude oil rose to its best levels since September 2008 amid increasing violence in parts of North Africa and the Middle East. Heading into the weekend, crude oil is up $2.46 to $104.37. The fear is the global economic impact from higher energy prices and therefore the earnings risk to corporate America. The Dow Jones Industrial Average is down 140 points. The tech-heavy NASDAQ lost 21. With 45 minutes left to trade, the CBOE Volatility Index (VIX) is up 1.07 to 19.67. Trading in the options market is slowing ahead of the weekend. 7.7 million calls and 6.4 million puts traded so far.

Bullish Flow

TIVO (NASDAQ: TIVO) trades down a nickel to $9.40 and 40,000 calls traded so far. A lot of the action is being driven by May call spreads. The TIVO May 10 – 15 Call Spread trades at $1.05, 2000 times and 1324 times. The TIVO May 11 – 17.5 Call Spread trades at $1.10, 4000 times and $1.175, 1800 times. The spreads look buyer-initiated and to reflect expectations for a substantial move higher in TIVO shares from now through May.

Bearish Flow

Goldman Sachs (NYSE: GS) is trading down $3.67 to $160.82 and implied volatility (IV) in GS options is up after BofA Merrill lowered the stock (and Citigroup [NYSE: C]) to Neutral from Buy. 27,000 calls and 31,000 puts now traded in Goldman. The top trade is a block of 1000 GS April 160 Puts at the $4.70 asking price. The next biggest trades look like a Jul 140 – 190 bullish risk-reversal at $1.95, 400 times. GS March 170 Calls and the expiring GS Weekly 160 Puts are the most actives. Implied volatility is up 9% to 24.5, compared to a 52-week high and low of 54 and 20.5.

Implied Volatility Mover

Central European Distribution (NASDAQ: CEDC), which fell 37.3% on earnings news Wednesday, is down another $1.45 to $12.49 today. Meanwhile, puts on the Bala Cynwyd, Penn.-based alcohol beverage importer/exporter are busy for a second day. Yesterday’s action was driven by a Sep 10 – 12.5 (2X1) put ratio backspread (bought 2 and sold 1) at a nickel, 5000 times, which appears to be a type of disaster insurance. Today’s volume includes 1800 calls and 18,000 puts. CEDC Sep 10 Puts are again the most active. Mar 10, Mar 12.5, Apr 12.5 and Sep 5 puts are seeing interest as well. Implied volatility is up 30% to 76 after Credit Suisse cut the stock to Underperform from Outperform.

Options Flow

Bullish flow detected in Fuqi International (NASDAQ: FUQI), with 5067 calls trading, or 10 times its recent average daily call volume.

Bullish flow detected in Endeavour Silver (AMEX: EXK), with 3563 calls trading, or two times its recent average daily call volume.

Bullish flow detected in Southwest Airlines (NYSE: LUV) with 8311 calls trading, or five times its recent average daily call volume.

Increasing volume is also being seen in Staples (NASDAQ: SPLS), Human Genome Sciences (NASDAQ: HGSI), and Marvell Tech (NASDAQ: MRVL).

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.