Take optionsXpress with You This Holiday 11-24-2010

Cusick's Corner
U.S. markets will be closed tomorrow for Thanksgiving and then re-open for just a half day on Friday. You can take optionsXpress Mobile with you this holiday and trade from anywhere on your favorite mobile phone or tablet device -- check your account, set Alerts, view your Watchlists, or enter trades for the shortened trading session on Friday. (One customer told me he uses optionsXpress Mobile as an excuse to avoid family and gain some quiet time over the holidays.) I will be back with the Corner on Monday. The Education Team at optionsXpress would like to wish you a Happy and Healthy Thanksgiving – enjoy the holiday with your family and friends.

The Dow Jones Industrial Average opened higher and extended morning gains on a busy day of economic news Wednesday. Before the opening bell on Wall Street, the Labor Department reported that filings for jobless fell by 34,000 to 407,000 last week, which was much better than the 1,000 increase that economists had expected. Separate data showed personal spending up .5 percent in October, which was .1 percent better than expected. The latest Durable Goods orders fell well short of expectations, however, falling 3.3 percent in October (vs. -.3 percent consensus). New Home Sales also fell more than expected, to an annual rate of 283,000 in November (vs. 314,000 consensus). However, the University of Michigan consumer sentiment index rose to 71.6 in late November, up from 69.3 earlier in the month and better than the 69.3 reading that economists had expected. At the end of the day, the economic news was mixed, but thin trading ahead of the holiday and a 3 percent rally in crude oil helped push stocks broadly higher. At the end of the day, the Dow Jones Industrial Average was up 151 points and had erased all of the 143-point loss from the day before. The NASDAQ added 48.

Bullish Flow
Amazon.com (AMZN) saw a day of heavy trading heading into Black Friday. The day after Thanksgiving is often called Black Friday because many retailers begin showing a profit for the year once the day is over. It's the busiest shopping day of the year. Earlier this week, Amazon.com said it has a new app that allows shoppers to check for prices across stores using mobile devices and then buy products online instantly when Amazon.com has the best price. In addition, AMZN got a boost this morning after Citi analysts wrote a note saying the stock is the best play in online retail. Shares touched a new 52-week high and finished up $9.05 to $177.25. Options volume jumped to 2.5X the average daily. 103,000 calls and 67,000 puts traded on AMZN. Short-term players appear to be looking for additional gains ahead of the weekend. The Weekly (11/26) calls that expire Saturday were the most actives.

Bullish options action was also seen in Tiffany (TIF), iStar Financial (SFI), and Net Logic (NETL).

Bearish Flow
Valueclick (VCLK) saw interesting trading activity Wednesday. Shares notched a new 52-week high and finished up 25 cents to $15.67. Options volume surged to 30X the recent average daily, with 24,000 puts and 1,350 calls traded on the online advertising and marketing company. December 11 puts were the most actives. 4,125 traded. The rest of the action was scattered across January and March 10, 11 and 12.5 puts. Implied volatility was up 12 percent to 45 on the day. There was no news on the company, but the surge in put volume and increasing implied volatility seemed to reflect concerns about potential weakness in the share price in the months ahead.

Bearish flow also picked up in Infinera (INFN), Polycom (PLCM), and WR Grace (GRA).

Index Trading
Trading was slow in the index market, as many institutional players left early for the Thanksgiving weekend. 381,000 calls and 443,000 puts traded across the S&P 500 Index (.SPX) and other cash indexes, which is about 75 percent the normal active. The CBOE Volatility Index (.VIX) lost 1.07 to 19.56. Meanwhile, one index did see an uptick in volume. To be specific, the NYSE Mini- Arca Oil Index (.BZJ) added .78 to 55.74 and blocks of Jan 57.5 calls traded, 7000 on the day. It looks like one or more investors were collecting 90 to 95 cents to open new positions in these out-of-the-money calls. Since BZJ tracks the price action of major oil companies, the action appears to reflect expectations that the sector will see limited upside from now through the January 2011 expiration.

ETF Trading
Large blocks of puts traded on some the Select Sector Funds Wednesday. In the Consumer Discretionary Select Sector Fund (XLY), for example, a block of 113,934 January 19 puts traded for one penny per contract in midday action. Shares finished the day up 74 cents to $36.61 and it appears that an investor was liquidating a position in these deep out-of-the-money puts. If so, they are likely exiting positions sold in mid-August when large blocks of XLY January 19 puts traded on the bid. Shares have performed well since that time, and now they're offsetting the position rather than run the risk that XLY gives up its gains and falls from now until January 2011. Similar trades were seen in the Financials Select Sector Fund (XLF) and Industrial Select Sector Fund (XLI).