optionsXpress Will Ring Opening Bell at NASDAQ 01-25-2011

Cusick's Corner
I just landed in NYC for optionsXpress' 10th Anniversary and tomorrow's Bell Ringing Ceremony with customers at the NASDAQ Market Site. The market started off weak, news that the UK's economy contracted in the 4th Quarter also revived some concerns over Spanish Banks. The Dollar is strong and Gold remains under pressure. Right now Energies and Financials are driving the market down lower and the Risk Off trade is on. Earnings news has not made a dent in the market today, most of the earnings expectations have been already baked in. See you After Hours.

Stocks are broadly lower through midday. Earnings were in focus early after five components of the Dow Jones Industrial Average released results Tuesday morning. The reaction was mixed. While Johnson & Johnson (JNJ) and 3M (MMM) are trading lower, Verizon (VZ), Traveler's (TRV) and Dupont (DD) are seeing post-earnings strength. However, American Express (AXP) is off 3.1 percent and the Dow's biggest loser after the company late-Monday reported a 94-cent quarterly profit, which was 3 cents shy of expectations. On the economic front, the Conference Board's Consumer Confidence Index surprised to the upside. It rose to 60.6 in January, from 53.3 in the final month of 2010 and much better than economist estimates of 53.5. The market didn't really react to the strong data. Instead, the Dow Jones Industrial Average is trading down 30 points and the tech-heavy NASDAQ has lost 8 points through midday. Trading in the options market remains active and a bit more cautious today, with 4.6 million calls and 4 puts traded through 12:15pm ET.

Bullish Flow
Star Scientific (CIGX), a Petersburg, VA cigarette maker, hit a high of $2.08 per share on a favorable ruling regarding a patent re-examination case. Shares are now up 2 cents to $1.73 and options action is brisk. 15,000 calls and 1,125 puts traded in CIGX through midday. The February 2 calls are the most actives. More than 11,000 traded. It looks like some investors are taking positions at a dime per contract. Although the stock traded north of $2 earlier today, these options are cheap at only 10 cents because the contract is 27 cents, or 15.6 percent, out-of-the-money with 24 days of life remaining. Some investors might be buying premium and hoping for another rally when CIGX reports results in early to mid-February. The last earnings were released on November 10.

Murphy Oil (MUR), an Eldorado, AR oil and gas company, is trading down $1.30 to $70.78 and options action is heating up ahead of earnings. The company is due to release results Wednesday afternoon. The top options trades today include a combination trade, in which an investor apparently sold 1,500 February 65 puts at 65 cents and bought 1,500 February 75 calls at $2.10. With shares midway between the two strike prices, this risk-reversal appears to be a bullish combination play ahead of the earnings news.

Bearish Flow
Put volume is picking up in Nordstrom (JWN). Shares of the retailer are trading down 59 cents to $41.59 and total options activity is running at 5X the average daily. 14,000 puts and 1,875 calls traded in Nordstrom through midday. April 41 puts are the most actives. 10,660 traded. With 63 percent trading at the ask and open interest of only 381 contracts, it looks like some investors are buying-to-open new positions, possibly bracing for a move below $41 through the April expiration.

SPDR500 Trust (SPY) is trading down 30 cents to $128.80 and a noteworthy trade today is an SPY February 126 – 121 (1X2) put ratio spread for a 21-cent net debit. In this spread, the strategist bought 19,500 February 126 puts at $1.09 and sold 39,000 February 121 puts at 44 cents. An institutional investor looking to hedge a stock portfolio might have initiated this massive spread. The potential pay-off is $4.78 (excluding commissions) if shares fall to $121 by the February expiration. There is also additional risk to the downside because half of the February 121 puts are not covered.

Unusual Volume
Corning (GLW) options volume is running 3.5X the average daily, with 66,000 contracts traded and call volume accounting for 61 percent of the volume, according to data from WhatsTrading.com.

iSharesMexico Fund (EWW) options volume is 5X the average daily, with 46,000 contracts traded and call volume representing for 51 percent of the activity.

Johnson & Johnson (JNJ) options volume is running 2.5X the average daily, with 39,000 contracts traded and call volume accounting for 53 percent of the activity.

Increasing options activity is also being seen in Eastman Kodak (EK), Nokia (NOK), and VM Ware (VMW)

Implied Volatility Mover
Clinical Data (CLDA) implied volatility is moving higher and options are actively traded, the day after the FDA approved the company's antidepressant. Shares rallied 67.5 percent on the news Monday and are up another $1.22 to $26.35 today, at session highs. 15,000 calls and 4,380 puts traded in the biotech so far. Implied volatility, which plummeted more than 70 percent yesterday, is up 11.5 percent to 67.5.