Banks Active Ahead of Earnings 04-08-2011

Cusick's Corner
There really is not much that I can bring to light today other than this market is clearly at a resistance point where most market traders and watchers are taking the road most traveled -- up. But the volume continues to be pathetic so there is no conviction. With the looming shutdown, there are sideline bets being made, possibly resulting in some hedging taking place into the weekend. If you take a look at the S&P 100 (OEX) Put/Call Ratio, we are seeing that institutions (those who typically trade this product) are hedging at a ratio of almost 2 to 1. While I am one to sometimes fight the tide, the uptrend, I like to know where the life preserver is just in case I need it. See you After Hours.

Stock market averages are moderately lower on a relatively slow news day. A lot of attention is on events in Washington and whether or not the government can avert a shut-down before the weekend. The deadline is midnight tonight and, if a resolution isn't reached, the government will shutter all of its "non-essential" operations. The economic implications are difficult to measure, but the market doesn't seem too concerned. As evidence, the Dow Jones Industrial Average is down just 4 points at midday. Beyond that, it's been a slow news day. The only economic stat was a report on Wholesale Inventories, which showed an increase of 1 percent in February and in-line with economist estimates. Meanwhile, crude oil added $1.52 to $111.82 an ounce and gold gained another $13.9 to $1473.20. The NASDAQ gave up 1.6 points. The CBOE Volatility Index (.VIX) is down .14 to 16.97. Overall options volume has been light this week and the trend continued today, with 4 million calls and 3.1 million puts traded through 12:30pm ET.

Bullish Flow
Bank of America (BAC) April 14 call options are the most actively traded stock option in today's session. Shares are trading down a dime to $13.51 and 63,280 contracts have changed hands. Morning trades included a block of 20,000 contracts at 14 cents on the International Securities Exchange, which was an opening buyer, according to ISEE data. If so, it's a short-term play. April options expire one week from today. The contract is 49-cents out-of-the-money and some investors might be looking for a bounce in BAC ahead of earnings. The bank releases its results on the morning of options-expiration Friday (4/15).

Pan America Silver (PAAS), a Vancouver-based miner, is rallying along with silver prices today. May silver was recently up 92 cents to $40.44 an ounce. Meanwhile, Pan America, which is also hosting an Analyst Day today, hit a new 52-week high and was trading up $3.44 to $42.78 at midday. 15,000 calls and 3,320 puts traded on the miner. The July 55 calls, which 28.6 percent out-of-the-money, are the most actives. 3,400 traded. April 40, 42 and 43 calls are busy as well.

Bearish Flow
613,000 puts traded on the SPDR 500 Trust (SPY) today; which is not high volume, but compares to about 31,000 call options. Shares are down 16 cents to $133.16 in quiet trading and the Weekly 133 puts, which are 13 cents out of-the-money and expire at the end of today, are the most actives. 80,690 traded, or twice the existing open interest in the contract. The action includes a block of 8,500 at the 14-cent ask price. Some investors might be buying these short-term puts as a play on events in Washington. With the government shut-down looming, trading could remain choppy in afternoon action Friday ahead of the weekend.

Jet Blue (JBLU) shares are down 27 cents to $5.85 amid another day of weakness in the airline sector. The NYSE Arca Airline Index (XAL) is down 4.3 percent this week on concerns about the potential impact of higher crude oil on jet fuel costs. JBLU is down 8 percent since March 30. Meanwhile, some investors seem to be bracing for additional losses in shares of the airliner. 2,155 puts and 265 calls traded in JetBlue so far. June 5 calls, which are 85 cents OTM, are the most actives. 1,620 traded. May 5 and 6 puts are seeing interest as well.

Unusual Volume
Expedia (EXPE) options volume is running 17X the (22-day) average, with 118,000 contracts traded and put volume accounting for about 54 percent of trades.

Seagate Tech (STX) options volume is 4.5X the average daily, with 90,000 contracts traded and call volume representing for 60 percent of the activity.

Puda Coal (PUDA) options volume is running 9X the average daily, with 55,000 contracts traded and put volume accounting for 63 percent of the activity.

Increasing options activity is also being seen in United Continental (UAL), AMR, and Gold Fields (GFI).

Implied Volatility Mover
Expedia (EXPE) shares are rallying and implied volatility is falling after the online travel company announced plans to split into two different entities. Shares are up 11 percent to $24.87 on the news. Options action is brisk as well, with 56,000 calls and 63,000 puts traded in Expedia. May 27 calls and 23 puts are the most actives. Meanwhile, implied volatility is down 15 percent to 30.