Greece is the Word 05-06-2011

Cusick's Corner
What a week -- Nonfarm Payrolls were the catalyst to the upside and then Greece tempered the positive nature of the data but the markets were able to retake half the damage of last session's move. The choppy action into the close and the Dollar firming up into the After Hours has raised some potential red flags for the trade early next week. Take the weekend to review holdings that may be good candidates for further upside. If owning the actual underlying outright might be hard to stomach, review a longer term option strategy, whether is the outright purchase of an individual option or a spread. Data will be light in the beginning of the week but Crude Inventories and PPI come out Wednesday. Have a great weekend and see you Midday.

Stock market averages finished higher with help from jobs data Friday. According to the Labor Department, the US economy added 244,000 payrolls in April. Economists were looking for an increase of 185,000. However, the unemployment rate ticked up .2 percent to 9 percent. Economists were expecting the rate of unemployed to stay steady at 8.8 percent. Hourly earnings rose .1 percent and half as much as expected. Still, after losing 224 points in the previous two trading sessions, the Dow Jones Industrial Average opened higher and was sporting a triple digit gain at midday. However, another day of volatility in the commodities markets seemed to keep a lid on any real rally attempts on Wall Street. Crude oil gave up early gains and finished near $97 per barrel. Crude lost 15 percent on the week. Silver lost 27 percent during that time and suffered its biggest loss in thirty years. Some of the volatility in the commodities markets is spilling over into the equity market as well. The Dow Jones Industrial Average finished the day up 55 points, but 120 points from session highs. The tech-heavy NASDAQ added 12.8.

Bullish
Sirius XM Radio (SIRI) shares notched new 52-week highs. The stock has been moving higher in recent weeks and finished up a dime to $2.22 Friday. SIRI has now rallied 34.5 percent since March. Players in the options market have been showing a lot interest in the satellite radio company as well. Today, for example, 72,000 calls and 17,000 puts traded in the name. January 2 calls, which are now 22 cents in-the-money, were the most actives. 18,760 changed hands. June 2, June 2.5 and January 2.5 calls saw brisk trading as well. There was no specific news item on the stock today, but the overall options order flow seemed to reflect investor expectations for additional gains in SIRI in the weeks/months ahead.

Bullish trading was also seen in Sandridge Energy (SD), Williams Companies (WMB), and Medifast (MED).

Bearish
Credit Suisse (CS) shares lost 59 cents to $42.31 today and gave up 7 percent on the week. The SEC recently subpoenaed CS over mortgages. Options action has turned defensive as well. 6,750 puts and 1,580 calls traded on the Swiss bank today, which is 10X the normal. Players were showing the most interest in May puts. The 41s traded 3,566 contracts. Another 3,100 May 42 puts changed hands. The five-day losing streak might be motivating short-term hedging or bearish bets in CS. May options expire two weeks from today.

Bearish flow also surfaced in Tyson Foods (TSN), Deutsche Bank (DB), and Santander (STD).

Index Trading
The CBOE Volatility Index (.VIX) had a see-saw session Friday. The volatility index hit a morning low of 16.12, but then rallied to an afternoon high of 19.29. VIX finished up .20 to 18.40 today and gained nearly 25 percent on the week. The S&P 500 Index (.SPX) fell in four of five trading sessions and gave up 1.7 percent on the week. Meanwhile, options action in the index market remains somewhat unimpressive despite the recent uptick in volatility. 535,000 calls and 586,000 puts traded across SPX, VIX and other index products today, according to Trade Alert data. VIX May 16 puts, which traded 27,800 contracts, were the day's most actives.

ETF Action
Another day of heavy trading in the iShares Silver Fund (SLV) Friday. After a five-day 28.7 percent slide, shares recaptured 2.3 percent to $34.48 today. 933,000 calls and 862,000 puts traded in the ETF. The May 40 calls, which are now 16 percent OTM, were the most actives. 83,745 traded. The expiring Weeklys (35 calls, 36 calls, 34 puts) saw heavy trading, as did May 30 puts. Meanwhile, the top trade of the day was a 16,500-contract block of Jun 41 calls at $1.07. It was sold as part of a ratio spread. The investor bought 11,000 June 35 calls and sold the Jun 41s to create a 1X1.5 spread at $1.35 debit. It appears to be a contrarian play targeting $41 per share in the silver fund by mid-June.