Options Recap — 6/29/12
Global equity markets are rallying around hopes EU leaders are making necessary steps to stem the debt crisis. Officials announced plans to provide capital to the region’s troubled banks directly rather than through European Central Banks. As was probably intended, the news triggered a sharp decline in Spanish and Italian bond yields. The euro surged 1.7 percent to 1.265 on the buck and equity markets rallied. Italy’s MIB gained 6.5 percent and Spain’s IBEX 5.7 percent. Germany’s DAX and France’s CAC 40 both rallied more than 4 percent. The enthusiasm spilled over on to US shores despite in-line May personal incomes/spending numbers as well as weaker-than-expected Chicago PMI and Uof Michigan Consumer Sentiment. Poor earnings from Nike (NKE) and RIMM didn’t have much market impact either. Instead, the news from Europe overshadowed any other headlines and the Dow Jones Industrial Average is up 233 points and the NASDAQ added 74 points. Crude oil bubbled $6 higher to $83.69 per barrel and gold gained $54 to $1604.50 an ounce. CBOE Volatility Index (.VIX) is off 1.71 to 18 amid the highest volumes seen this week. 6.6 million calls and 6 million puts so far.
Bullish Flow
Valero (VLO) adds 16 cents to $24.09 and is seeing muted reaction to today’s surge in crude oil prices, which were recently up 7.6 percent to $83.62 per barrel and session highs. One player seems to be anticipating strength in shares of the oil refiner, however, as a Jan 30 – 35 call spread was bought on VLO for 50 cents, 15000X on ISE. A customer bought the spread, to open, according to ISEE. The stock has seen relative strength in recent weeks despite volatility in the commodity, VLO is up 14.7 percent month-to-date.
Bearish Flow
JC Penney (JCP) is up 52 cents to $22.98 and the Nov 17 – 21 put ratio spread, which saw interest earlier this week and late last week, is seeing interest again today. 15,000 traded for 44 cents, as it appears that the investor bought 1 Nov 21 puts for every 2 Nov 17 sold and probably adding to the positions, which are now the two largest positions in the name (see 6/22 and 6/26 color for additional details and possible motivation for bearish trading in the retailer).
Category: Market Update
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About the Author (Author Profile)
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. As senior analyst, Fred provides frequent and regular notes and daily updates for activity of interest.
