Market Trading Like a Tennis Match!

Cusick's Corner
The tennis match continues into the Midday, with the bulls bouncing back from the lows. The market hit the lows on the ADP data which to me was very interesting, thought there could be a run to upside on the heels of a good number. Battle lines are being drawn, with the consolidation between 1300 and 1310 on the S&Ps. The bulls would like to see the market stay in this consolidation, especially with the Mid-East still very volatile and $100 oil. They need these issues to settle for the upside to commence again. The bears look ready to challenge the After Hours trade, watch the 1310 level on the S&P 500 as a key battleground.

Stock market averages are holding modest gains with help from stronger-than-expected jobs data. According to a report released from ADP Wednesday morning, the US economy added 217,000 private sector jobs in February. Economists were looking for an increase of 165,000. The news comes two days prior to the Labor Department's key monthly report. Economists expect Friday's report, which includes both public and private sector payrolls, to show an increase of 183,000. The overall tone of trading remains cautious despite the strong data, however, as many investors remain fixated on events overseas and the recent spike in crude oil prices. Crude is up another $2.33 to $101.96 a barrel. Both the Dow Jones Industrial Average and the NASDAQ have added 13 points. The CBOE Volatility Index (.VIX) lost .52 to 20.49. Overall options volume is running about typical levels, with 4.4 million calls and 3.8 million puts traded through 12:30pm ET.

Bullish Flow
Foster Wheeler (FWLT), a Lausanne, Switzerland-headquartered heavy construction company, is trading up 28 cents to $35.77 and options volume is running 2.5X the average daily. 11,000 calls and 1,035 puts traded in the name so far. March 39 calls were the most actives. 3,670 contracts traded with two thirds trading at the asking price, indicating increasing buying interest. March 38 and 40 calls are seeing interest as well. The speculative activity appears to be in reaction to takeover chatter. It is unsubstantiated market talk, but seems to be the reason for the increasing volume in FWLT March call options today.

Endeavor Silver Mining (EXK), a Vancouver-based miner, is trading up 34 cents to $8.62. Options volume is 5X the average daily. Shares are notching fresh 52-week highs after the recent rally in silver continued for another day. Silver is up 44 cents to $34.86. Meanwhile, EXK options are actively traded Wednesday, with 6,975 calls and 275 puts traded in the name. Trading is brisk in the Mar and April 7.5 and 10 calls, which seems like bullish trading in reaction the ongoing rally in silver prices and expectations that the rise in the metal will boost profits for the miner.

Bearish Flow
MBIA (MBI) shares are trading down 68 cents to $10.37 after the Armonk, NY surety and title insurance company reported earnings after the close of trading Tuesday. Investors seemed disappointed with the results, as shares are down on the news and today's options volume includes 13,000 puts and 5,570 calls. The top trade is a May 6 – Aug 7 put spread, which was apparently bought at 54 cents, 5000X. In this spread, the investor sold the May 6 puts and bought the August 7 puts, possibly rolling out a bearish position or hedge an additional three months.

An interesting spread went off in the SPDR 500 Trust (SPY) Wednesday morning. The “SPYders” are trading up 34 cents to $131.27 on a relatively slow day on Wall Street. Meanwhile, one of the top trades of the day in the fund is an April 123 – 126 – 129 put spread at 28 cents, 10000X. In this spread, the strategist sold 20,000 April 126 puts for the body of the fly and bought half as many of the 123s and 129s for the wings. It's possibly a short-term hedge, as it makes its best profits if shares fall to $126 by the April expiration, which represents a market decline of about 4 percent.

Unusual Volume
MetLife (MET) options volume is running 5X the (22-day) average, with 37,000 contracts traded and put volume accounting for 69 percent of the volume.

Weatherford (WFT) options volume is 9X the average daily, with 145,000 contracts traded and call volume representing for 69 percent of the activity.

Yamana Gold (AUY) options volume is running 2X the average daily, with 36,000 contracts traded and call volume accounting for 92 percent of the activity.

Increasing options activity is also being seen in Keycorp (KEY), Lorillard (LO), and Texas Instruments (TXN).

Implied Volatility Mover
Suntech Power (STP) options volume is picking up and implied volatility is higher ahead of earnings. Shares are currently down 10 cents to $9.68. Options volume is 10,000 calls and 1,400 puts, or 3X the expected for midday. Implied volatility is up 12 percent to 44 and the heightened activity might be a play on earnings. The company is due to report on March 8, after market hours.