Market Sentiment
The major averages traded in a narrow range and were modestly higher late Friday. With no earnings of broad market significance and a light economic calendar, there wasn't much news to guide the early action.
The latest trade balance numbers, released pre-market, showed the deficit unexpectedly narrowing last month. It shrank to $30.7 billion in August from $31.9 billion the month before. Economists were expecting the deficit to widen to $33 billion. The first decline in May came as exports hit their highest level for the year and imports eased.
The dollar saw a modest move higher on the news and the gains in the buck put modest pressure on crude oil and gold prices early. However, crude oil has battled back and is up 21 cents to $71.90 late in the day. After big gains tallied earlier this week, gold is down $8 to $1048.30 an ounce.
Meanwhile, the Dow Jones Industrial Average traded in a narrow 70-point range and was up 40 points heading into the final 90 minutes of trading. The CBOE Volatility Index (.VIX) is down for a fifth day and is off .72 to 23.46. Trading in the options market is on the light side, with approximately 3.6 million puts and 4.7 million calls traded so far (a ratio of .77, compared to a 22-day average of .77).
Bullish Flow
85,000 Research in Motion (RIM) calls traded as of late Friday. Shares are up 93 cents to $69.59 and Oct 70 and 75 calls are active after Silicon Alley Insider Henry Blodget appeared on Bloomberg saying, in order to compete in the mobile market, it's a no-brainer: Microsoft (MSFT) needs to buy Research in Motion.
The top options trade so far today is 86K Citi (C) Nov 5 calls, bought for 20 cents. It was tied to a block of 4.3 million (50 delta) Citi shares at $4.63.
Bearish Flow
Costco (COST) puts saw some interest Friday. COST shares, which jumped mid-week after the retailer posted better-than-expected earnings, are down 60 cents to $58.03. One trader sold 5,300 Nov 60 puts to collect $3.30 per contract. Meanwhile, it appears that Oct 57.5 puts are being bought-to-open. The top trade is 3,643 contracts at the offer for 60 cents on ISE and is possibly a non-customer or firm buyer. 17,250 now traded vs. 4,712 in open interest. 85 percent hit ask-side. Some investors might be bracing for a pullback in COST before next week's October expiration. Monthly retail sales numbers are due Wednesday.
Implied Volatility Movers
Acorda Therapeutics (ACOR) is down 14.3% to $19.09 and implied volatility is higher after Bloomberg reported that the company's Multiple Sclerosis (MS) drug might need more study. The report comes after ACOR released FDA briefing documents for the review of its drug Fampridine-SR. In the options market, volume is running 8X the usual and implied volatility (average) is rallying to 156, from about 138 late yesterday.
Implied volatility is also higher in American Superconductor (AMSC), Riverbed Technology (RVBD), and Liberty Media (LINTA). Implied volatility is falling in Infosys (INFY), Citi (C), and the S&P 500 Index (SPX).
Unusual Volume Movers
Real-Time at WhatsTrading.com
Rambus (RMBS) is seeing 6X average daily trading volume, with 97,000 contracts traded and call volume representing 88% of today's activity.
Sprint Nextel (S) is seeing 2X average trading volume, with 64,000 contracts traded and call volume representing 72% of today's trading activity.
IBM is seeing 2X normal trading volume. 64,000 contracts have traded, with calls representing 66% of today's volume.
Unusual volume (two times or more than normal average volume) is also being seen in Plum Creek Timber (PCL) and Occidental Petroleum (OXY).
Regards,
Fred Ruffy
Senior Options Strategist, WhatsTrading.com
TradeKing All-Star Commentator
Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options.
While implied volatility represents the consensus of the marketplace as to the future level of stock price volatility or probability of reaching a specific price point, there’s no guarantee that this forecast will be correct.
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