Fred Ruffy recaps emerging trends from the latest trading session.

Market Sentiment

Stocks opened higher on positive earnings from Cisco (CSCO) and a bigger-than-expected decline in weekly jobless claims. Before the opening bell, the Labor Department reported that jobless claims fell by 20,000 to 512,000 last week. Economists were looking for a smaller 8,000 decline. The report takes on added importance this week, as it comes ahead of the Labor Department's monthly jobs data Friday. Economists expect tomorrow's numbers to show the economy losing 175,000 jobs in October. The unemployment rate is expected to improve to 6.5 percent, from 6.6 percent.

Meanwhile, Cisco Systems is helping both the Dow and the NASDAQ. Shares are up 68 cents to $23.97 after the tech bellwether reported earnings that beat Street estimates and the company's CEO also noted that a recovery in the industry is "well underway." CSCO and the other 29 components of the Dow were up and the industrial average added 200 points heading into the final forty-five minutes of trading Thursday. The NASDAQ gained 47.

Meanwhile, the CBOE Volatility Index (.VIX) is down another 2.12 to 25.60 and off more than 5 points on the week. Trading in the options market is running about the typical levels, with 4.8 million puts and 6.2 million calls changing hands so far (a ratio of .77, compared to a 22-day average of .80).


Bullish Flow

Big Pints again in BofA (BAC) Thursday after an investor sold 100K Nov 16 calls at 19 cents and bought 130K Nov 17.5 calls at 4 cents. This might close part of a vertical spread that traded on Oct 28 when a strategist bought the same spread 120000X at 34 cents. Shares were near $15.30 at the time.

(Spreads are multiple-leg options strategies involving additional risks and multiple commissions and may result in complex tax treatments. Keep the risk of early assignment in mind when constructing your own trades. Consult with your tax advisor as to how taxes may affect the outcome of these strategies.)


Bearish Flow

Sun Micro (JAVA) is down 4 cents to $8.28 and the Nov 8 - Jan 6 put spread trades 15000X. An investor pays an average of 3.5 cents and is possibly rolling a position in long puts from Nov to Jan, and from the 8 to the 6 line. The company is expected to report earnings soon, but the exact date is not yet announced.
Meanwhile, the EU is debating Oracle (ORCL)'s merger plans with JAVA. The NY Times reports today that the EU risks opening a new era of trans-Atlantic anti-trust tensions if it confronts ORCL. However, letting Oracle off the hook might be a sign of weakness. Consequently, one of the best outcomes for the EU would be for Oracle to cancel the deal.


Implied Volatility Movers

Starbucks (SBUX) options are actively traded and implied volatility is elevated ahead of earnings, due out after the closing bell. SBUX is up 49 cents to $19.70 and options volume is running 4X the average daily, with 25,000 calls and 23,000 puts traded so far. Implied volatility is moving up to 51.7, from 46.4 late yesterday.

Implied volatility is also higher in Sprint Nextel (S) and ITT Education Services (ESI). Implied volatility is lower in DirectTV (DTV), Cisco (CSCO), and the S&P 500.


Unusual Volume Movers
Real-Time at WhatsTrading.com

CVS Caremark (CVS) is seeing 27X average daily trading volume, with 246,000 contracts traded and call volume representing 59% of today's activity.

Cisco Systems (CSCO) is seeing 2X average trading volume, with 151,000 contracts traded and call volume representing 70% of today's trading activity.

Qualcomm (QCOM) is seeing 2X normal trading volume. 118,000 contracts have traded, with calls representing 62% of today's volume.

Unusual volume (two times or more than normal average volume) is also being seen in McDonald's (MCD), Whole Foods (WFMI), and Sunoco (SUN).

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.

In reading content in the Trader Network, you may gain ideas about when, where, and how to invest your money. Although you may discover new ideas or rationale that may be compelling, you must ultimately decide whether or not to put your own money at risk. Consider the following when making an investment decision: your financial and tax situation, your risk profile, and transaction costs.

Frederic Ruffy maintains a cross-marketing relationship with TradeKing.