Data Mixed 05-27-2011

Cusick's Corner
This is what I expected going into this long weekend -- a listless consolidated trade. I was not surprised the market was mute when the housing data came out. The market's reaction was one that could be expected since the Income and Spending numbers came in line which was huge. I will keep an eye out for any the headlines (not expecting any) because that is the only way that the market could move into the close. See you in a few hours.

Stock market averages are holding gains heading into the three-day Memorial Day weekend. The economic news of the day was mixed. Data released before the opening bell showed Personal Income and Spending numbers both increasing by .4 percent in April. Economists were looking for incomes to rise by .4 percent and spending by .5 percent. The University of Michigan was released later. The index increased to 74.3 in May, from 72.4 mid-month and better than the 72.4 that was expected. However, Pending Home Sales unexpectedly plummeted 11.6 percent last month. Economists were looking for a decline of 1.4 percent. Stock market averages seemed to shrug off the mixed data. A rebound in the euro is possibly easing some recent worry about the European Debt Crisis. The currency is strong today after ECB member George Provopoulos said that Greece can handle its debt payments. The euro gained 1 percent against the dollar. Crude oil is little changed near $100 per barrel, but gold rallied $12.10 to $1,534.90 an ounce. Meanwhile, the Dow Jones Industrial Average gained 73 points through midday and the tech-heavy NASDAQ added 17.3. The CBOE Volatility Index (.VIX) lost another .62 to 15.47. Overall options volume is likely to slow this afternoon heading into the holiday weekend. 3.4 million calls and 2.6 million puts traded through 11:45pm ET.

Bullish Flow
73,000 calls and 13,000 puts traded in Marvel Technology (MRVL) today. Shares rallied $1.53 to $16.09 Friday morning after the chipmaker reported first quarter earnings that missed Street estimates, but then issued upside guidance for the second quarter. June 15 call options are the day's most active options in the integrated circuit maker. Volume is approaching 19,000 contracts. Open interest is more than 41,000 contracts and the largest position in MRVL. The contract is now 7.3 percent in-the-money and some investors are probably liquidating bullish positions on the heels of the post-earnings rally. June 16 and 17 calls, which expire in three weeks, are seeing brisk trading as well.

American Eagle (AEO) calls are active, the day after the stock tumbled 4.7 percent on earnings news. Shares of the apparel retailer are now down 19 percent in a little more than one month. Some investors might see the weakness as an opportunity for bullish trades. With AEO down another 6 cents to $13.04, today's options volume includes 6,830 calls and 1,430 puts. June 14 calls, which are now 7.4 percent out-of-the-money, are the most actives. 2,680 traded. July 14 calls are seeing interest as well. Volume is 1,420 contracts.

Bearish Flow
Omnivision Technology (OVTI) is down on earnings. Shares are off $2.41 to $34.01 after the company reported quarterly profits that topped Street views, but then issued downside guidance for the current quarter. The top options trade of the day is in the December contracts. In this strategy, the investor apparently bought 912 December 30 puts at $3.60 and sold 912 December 40 calls at $3.20. Therefore, they paid 40 cents for this bearish risk-reversal and might be bracing for additional losses in OVTI through yearend. The combo has traded more than 2000X. A shareholder might have initiated the position as part of a collar strategy.

One of the top trades on a relatively slow morning of options action Friday is in the SPDR 500 Trust (SPY). The so-called SPYders are trading up 55 cents to $133.55. Meanwhile, in options action, a block of 28,000 SPY June 123 puts traded for 17 cents. The same investor also bought 9,500 June 129 puts at 65 cents per contract, according to a source on the exchange floor. Therefore, the position is a June 129 - 123 put ratio spread and one that makes its best profits if shares fall to $123 through the June expiration, which represents a market decline of 7.9 percent over the next three weeks. A portfolio manager might have initiated the spread as a short-term hedge heading into a long weekend.

Unusual Volume
Marvel Technology (MRVL) options volume is running 3X the (22-day) average, with 89,000 contracts traded and call volume accounting for about 85 percent of trades.

Conagra (CAG) options volume is 9X the average daily, with 61,000 contracts traded and call volume representing for 99 percent of the activity.

CVS options volume is running 4X the average daily, with 41,000 contracts traded and call volume accounting for 79 percent of the activity.

Increasing options activity is also being seen in Medco Health Solutions (MHS), Elan (ELN), and Lennar (LEN).

Implied Volatility Mover
Medco Health Solutions (MHS) shares are under pressure and implied volatility is up today. The stock is down $7.84 to $56.60 on news the company is losing a Regence Blue Cross/Blue Shield government-wide pharmacy benefits contract to CVS. Shares of CVS are up 85 cents to $39 and touching 52-week highs, but MHS is reeling. Meanwhile, options volume in Medco includes 22,000 calls and 18,000 puts. Implied volatility jumped 17 percent to 28.5.