Stocks slump, VIX jumps, as investors brace for this week’s “event risk” Read More.

Nvidia (NVDA) shares are off 2.5% to $11.30 and stock holders appear to be getting nervous about graphic chipmaker’s the near term outlook. The July $11 put has traded 24,300 contracts against prior open interest of 7,896. Most of the volume was done early today buying at the ask which started with 4,500 block at $0.30 cents and culminated with a couple of thousand at $0.45 within the first hour of trading minutes. The buying drove IV up 7% to 57% but has since retreated to the 54% level.

Novavax (NVAX) is bucking the bearish trend. Shares are up 90 cents to $3.40 and not far from session highs ($3.48) on news the Spanish government selected the company’s technology for a comprehensive flu vaccine program in Spain. Shares are rallying and options volume is running 4X the usual, with 5,900 calls and 987 puts traded (chart). July and January calls at the $2.5 strike are the most actives. July and August 5 calls are seeing interest as well.

Ford Motor (F) calls are seeing active trading for a second day ahead of monthly auto and truck sales numbers, due out tomorrow. Investors seem to expect good news. F shares are up a quarter to $6.03 and 48K calls traded, compared to 15K puts. July 6 and August 7 calls are the most actives, with (a combined) 31K traded and about 55 percent hitting ask-side. Similarly, ISEE sentiment data indicate that 57 percent of the calls trade on the ISE (or 7,800 contracts) are opening customer call buys. Implied volatility is up to 64, from about 58 the day before.

Sina Corp (SINA) is down $1 to $29.31 and investors are buying puts on the Chinese Intenet company Tuesday. Pacific Crest analysts downgraded SINA yesterday, saying Street estimates for 2009 and 2010 earnings are too high! They believe the company will struggle to maintain market share and Focus Media (FMCN) deal adds uncertainty. Sentiment in the options market is clearly defensive Tuesday, with 12,000 puts and only 325 calls traded (chart). Buyers of Sept 17.5 puts leading the activity and looking for a move below $17.50, or 40 percent, by the September expiration.

The CBOE Volatility Index (.VIX) is up 2 points to 27.35 and not far from session highs, as bearish economic data and increased activity due to the end-of-quarter “window dressing” add some volatility to the mix Tuesday. A report on consumer confidence index, which fell to 49.3 in June, from 54.9 (vs. 55.3 consensus), served as a catalyst for the morning slide and, as the major averages faltered, VIX began a move higher.

Thursday’s payroll numbers now loom and with thin trading due to the holiday (markets closed Friday), volatility might continue into the three-day break. Investors will get a first look at the jobs situation courtesy of ADP’s private sector report due out Wednesday morning. Construction spending, pending home sales, the ISM manufacturing index, crude oil inventory data, and auto/truck sales could add some fun to trading tomorrow. Given all this “event risk”, it makes sense the VIX is moving higher midday Tuesday.


Meanwhile, the actual volatility of the S&P 500 (20-day statisical volatility) has dipped below 20 percent. So, VIX back above 30 would indicate that investors now expect significantly greater volatility in July, compared to what we have seen during the month of June.

Raser (RZ) shares are falling $1.14 or 28% to $2.72after the power company announced $25mm offering. This is generating 5x daily option volume in the thinly traded issue. There is obvious activity in front month puts with the July and August $2.50s trading 440 and 350 contracts respectively, each exceeds prior open interest. But what is more notable is action in the 2011 LEAPS in which the $2.50 and $5.00 calls have traded 320 and 880 contracts. Prior open interest is sufficient to cover but it looks like someone is rolling down, liquidating the $5 and buying the $2.50’s. The in these LEAPs is off some 14% to 81% on the day.

Wyeth (WYE) slipped 25 cents to $45.10 and 93K calls traded, compared to only 1,330 puts. Several blocks of Aug 45, Aug 50, Oct 42.5, and Oct 47.5 calls totaling about 20K contracts traded on the ISE, which were 75 percent opening customer call buyers, according to sentiment data. Later, the Oct 42.5 - 47.5 call spread traded 16500X–looks like a buyer. The Oct 45 - 50 call spread traded 16500X a minute later–also looks like a buyer. In the end, the action seems to reflect expectations of a move to between $47.50 and $50 by the Oct expiration. Pfizer has made a bid for WYE equal to $33 per share plus .985 PFE shares. With PFE down 41 cents to $14.84, the current value is $47.61.

Medarex (MEDX) is up 17 cents to $8.40 and directional order flow in the options market is bullish, as investors react to news the company will receive a milestone payment from Novartis (NVS)–Link to story. The payment, for an undisclosed amount, is in connection with FDA approval to market Ilaris for the treatment of cryopyrin-associated periodic syndrome. I have absolutely no idea what I just said, but traders in the options market seem to like it. 4,560 calls traded, or about 8X the expected for midday. August 10 calls are the most actives and ISEE sentiment data point to active opening customer call buyers. Implied volatility is up to 63, from about 61.5 the day before.

Exco Resources (XCO) is up $1.56 to $12.68 after the company announced a joint venture with BG Group to develop its Haynseville Shale and other East Texas/North Louisianna operations (Link to story). In the options market, trading is active, with 16K calls and 3,300 puts traded.

Interestingly, bullish bets have been building in XCO in recent weeks, even as shares lost more than one-third in value during the first few weeks of June (chart). However, shares are now up more than 30 percent from June 23 lows. Active trading in August, September, and December out-of-the-money calls seems to reflect expectations for additional gains in the months ahead.