Watching 1250 06-08-2011

Cusick's Corner
The market is hovering at the moment, no real change over yesterday's close. Most traders are now watching the 1250 level. Europe was weak overnight and the Euro is dropping, but the headlines are not inspiring much of a trend in the trade so far today, some of the bearish move has already taken place over the past six days. The next item on the economic docket is the Fed's Beige Book, containing anecdotal views from the Fed's 12 Districts, which comes out today at 2:00pm ET. See you After Hours.

Stock market averages are modestly lower following a round of uninspiring stock news Wednesday. With no economic data to guide the morning action, some of the early focus was on OPEC. The oil cartel couldn't reach an agreement on production cuts and the indecision sent crude oil bubbling $1.77 higher to $100.86 a barrel. Exxon Mobile (XOM) is up 1.5 percent and a leader within the Dow Jones Industrial Average. Beyond that, however, the headlines didn't offer much fodder for the bulls. McDonald's (MCD) is trading down after the fast food chain's May sales numbers fell short of expectations. Hovnanian (HOV) is weighing on the homebuilders after its profit missed Street estimates. Ciena (CIEN) is also lower on earnings news. Meanwhile, the Dow is extending a losing streak to six days. The industrial average is down 8 points. The tech-heavy NASDAQ lost 13.4. The CBOE Volatility Index (.VIX) is flat at 18.07. Trading in the options market reflects the cautious underlying tone on Wall Street, with 3.2 million calls and 3.6 million puts traded through 11:50am ET.

Bullish Flow
Advanced Micro Devices (AMD) options are actively traded today. Shares of the chipmaker have battled back from morning weakness and are up 7 cents to $7.78 through midday. Today's options volume, of 58,000 calls and 31,000 puts, is 5X the average daily volume for AMD. July $8 calls, which are 2.8 percent out-of-the-money and expiring in 37 days, are the most actives. 25,150 traded against open interest of 10,737 in open interest. January $10 calls are the second most actives. More than 20,000 changed hands. Prior to today, shares had suffered a five-day 11.2 percent losing skid. Some investors might see the recent weakness as an opportunity for bullish trades and are taking positions in AMD out-of-the-money call options.

Capital One (COF) is seeing relative strength and increased call activity Wednesday. Shares have added 30 cents to $50.46. Meanwhile, volume in COF options is 9,100 calls and 1,465 puts, which is 3X the typical volume for midday. June 52.5 calls, which are 4 percent out-of-the-money and expiring at the end of next week, are the most actives. More than 5,000 traded against open interest of 1,357. June and July 55 calls are seeing interest as well. The bullish trading in COF comes after a 7.7 percent five-day slide in the share price.

Bearish Flow
Ciena (CIEN) is down and put volume is up in the Linthicum, Maryland networking company. Shares are down $3.50 to $20.71 and options activity includes 23,000 calls and 40,000 puts after the company reported a wider-than-expected second quarter loss. Ciena also lowered guidance for the third quarter. July 27 puts, which have traded more than 6,000 contracts, are the most actively traded options in the name. The put is now 23.3 percent in-the-money and has traded 63 percent on the bid. Some investors are probably closing out bearish positions after the slide in the share price. July 20, 25 and 26 puts on Ciena are busy as well.

SPDR Homebuilders Trust (XHB) is down 17 cents to $17.30 and being weighed down by a 4.9 percent loss in Hovnanian (HOV), which is trading lower on earnings news. Meanwhile, options volume in the homebuilder ETF is 2X the average daily. 17,000 calls and 6,015 puts traded. The top trade is a block of 12,600 January 16 calls on the $2.10 bid. The trade comes the day after a block of 35,000 were sold at $2.36. Today's open interest data indicate that a position was closed, as open interest in the XHB Jan 16 call declined to 18,313 contacts from 50,586. Today's trades might close as well. The contract is $1.30 in-the-money and investors might be selling the contract on the view that the rally in the homebuilders since August 2010 has run its course.

Unusual Volume
AMD options volume is running 5X the (22-day) average, with 88,000 contracts traded and call volume accounting for about 65 percent of trades.

Ciena (CIEN) options volume is 4X the average daily, with 65,000 contracts traded and put volume representing for 62 percent of the activity.

Altera (ALRT) options volume is running 6X the average daily, with 26,000 contracts traded and put volume accounting for 81 percent of the activity.

Increasing options activity is also being seen in BJ Wholesale (BJ), SPDR Utility ETF (XLU), and China Biotics (CHBT).

Implied Volatility Mover
Waste Management (WM) options volume is picking up and implied volatility is moving higher today. Shares are down 19 cents to $36.99 and options volume includes 15,000 puts, which is 7X the expected for midday and more than 5X the day's call volume. June 34, June 36 and July 35 puts are actively traded. Some investors seem to be anticipating downside in WM shares and implied volatility in WM options is up 12 percent to 30.