The options market update, posted one hour before the close on Wednesday,
January 12, 2011 by Frederic Ruffy. Bullish flow detected in China MediaExpress
(NASDAQ: CCME ), with 4888 calls trading, or two times the recent average daily
call volume. Bullish flow detected in Kimberly-Clark Corp. (NYSE: KMB ), with
8112 calls trading, or five times the recent average daily call volume. Bearish
activity detected in Northrop Grumman (NYSE: NOC ), with 2207 puts trading, or
four times the recent average daily put volume in the name. Increasing volume is
also being seen in NVidia (NASDAQ: NVDA ), Walmart (NYSE: WMT), and Monsanto
(NYSE: MON ). Sentiment The table was set for morning gains on Wall Street after
stock market averages moved broadly higher across the Euro-zone. Spain's IBEX
index rallied 5.4% on news of a successful bond auction in Portugal. In the
U.S., the financials rallied and an hour before the close Bank of America (NYSE:
BAC ) and JP Morgan (NYSE: JPM ) are leading the Dow Jones Industrial Average to
an 85-point gain. Exxon (NYSE: XOM ) and Chevron (NYSE: CVX ) are also helping
the Dow after crude oil settled just shy of $92 a barrel. Agricultural
commodities are also rallying after the USDA released a bullish crop report
Wednesday morning. Meanwhile, the tech-heavy NASDAQ is up 17.5 points. With less
than an hour to trade, the CBOE Volatility Index ( .VIX ) is down .41 to 16.48.
Trading in the options market is active and reflects the bullish underlying
tone, with 8 million calls and 5.6 million puts traded so far. Bullish Flow
Technology Select Sector SPDR (NYSE: XLK ) touches a new 52-week high and is up
20 cents to $25.93 and one investor buys-to-open a block of 100,000 XLK January
26 Calls at 21 cents each. The position, which appears opening, is a short-term
play. January options expire at the end of next week and markets are closed
Monday for the holiday. After today, only six trading days remaining before the
January expiration. It might be a play on the recent momentum in the tech sector
and or earnings from Intel (NASDAQ: INTC) Thursday afternoon. Micron Technology
(NASDAQ: MU ) shares are rallying and call volume is surging. Shares are up 56
cents to $9.28 and 65,000 contracts traded on the chipmaker. MU Feb 9 and 10
Calls are seeing brisk trading, driven predominately by buyers, as more than
two-thirds trading at the asking price. Some investors might be liquidating
positions in Jan 9 calls, which have traded 15,900 times (59% on the bid).
Implied volatility (IV) is up 2.5% to 42. No news on the stock today, but note
that the company is presenting at a Needham Growth Conference and MU was also
the subject of bullish activity two days ago. Bearish Flow The top trades of the
day recently surfaced in the SPYders SPDR S&P 500 (NYSE: SPY ) and are part of a
put fly, in which the investor sold 80,000 SPY Feb 121 Puts at 60 cents to buy
40,000 SPY Feb 116 Puts at 26 cents and buy 40,000 SPY Feb 126 Puts at $1.47.
This fly, for a net debit of 53 cents, is likely a short-term hedge. With shares
up $1.15 to $128.58, this spread offers a max pay-off if shares fall to $121
(5.9% by the Feb expiration (37 days to go). Implied Volatility Mover PMC-Sierra
(NASDAQ: PMCS ) adds 19 cents to $9 per share and speculative buyers surfaced in
the name Wednesday morning. The PMCS Jan $9 Calls are the most active with
2600 traded (76% ask) vs. 553 in open interest. Looks like opening buyers in Jan
$10 calls as well. In total, 5,150 calls and 100 puts traded on the chipmaker
through midday. Implied volatility jumped 13.5% to 42. Author Frederic Ruffy is
a well-known trader, writer, and strategist who has spent years educating
investors and creating intelligent, insightful, unbiased market observations
that are frequently cited by the Wall Street Journal and other financial
publications.
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