Harami Print 06-17-2010

Cusick’s Corner
With the Claims numbers worse than expected, the market has been holding up pretty well. This could be in part because the Euro is holding above $1.23. What is making me a little suspect of a continuation is that there was a Harami print yesterday. Take a look at the SPY day chart -- indicating indecision in the market and a potential reversal? With this being expiration, today is that last day to trade European style options and tomorrow American style, so there is potential for some volatility. Watch support on the major averages, 1100 on the SPX. See you After Hours.

Stocks are trading lower following a round of disappointing economic news Thursday. Data released before the opening bell showed weekly jobless claims up 12,000 to 472,000 in the period ended June 12. Economists were looking for a drop of 10,000. Separate data showed the May CPI falling .2 percent, and two times more than expected. The Dow Jones Industrial Average held steady at the open despite the disappointing data after the euro made a run back towards 1.24 against the buck. European equity markets traded steady and the euro jumped following news of a successful auction of Spanish 10-year bonds. However, two additional economic reports released at 9:00am ET also fell short of expectations. The May List of Leading Economic Indicators rose .4 percent in May, which was less than the .5 percent increase that economists had expected. Even worse, the Philadelphia Fed Manufacturing Survey plummeted to just 8 in June, down from 21.4 in May and significantly below economist estimates of 20.0. The Dow fell on the news and is down 40 points midday. The CBOE Volatility Index (.VIX) slipped .26 to 25.66 and trading is active heading into the options expiration, with about 4.3 million calls and 3.6 million puts traded at 12:30 ET.

Bullish
Citi (C) shares are up a penny to $4 Thursday and 425,000 calls have traded on the bank so far. June 4 calls are the most actives. More than 104,000 contracts changed hands. The Citi June 4 call option has nearly 1 million contracts of existing open interest, which is the second largest of any June options contract (behind the Citi June 5 call.) Consequently, some investors are likely scrambling to close out positions ahead of the expiration and as the stock gets “pinned” to the $4 strike. If shares settle at $4 or less Friday, all of those call options expire worthless. September 4 call options are busy as well. 106,000 traded. Some investors are possibly rolling positions from the June 4 calls to the September 4s.

Cirrus Logic (CRUS) shares are up $1.29 to $16.79 after Mad Money talk show host Jim Cramer interviewed the company’s CEO and also made positive comments about the chipmaker Wednesday. Options volume is 4X the average daily, with 9,560 calls and 1,500 puts traded so far. Investors are actively trading July, September and December 15 and 17.5 calls, as Cirrus shares rally Thursday.

Bearish
Career Education (CECO) puts are seeing interest. Shares are up 7 cents to $27.06 and almost 19,000 June 26 puts have traded so far. While some premium selling is being seen, the top trade is a block of 3,710 June 26 puts at 30 cents on the ISE, which is an opening customer buyer, according to ISEE data. It’s a short-term play because June options expire Saturday and, after today, have only one trading day of life remaining.

Sony (SNE) shares are down 3 cents to $28.30 and 3,630 puts traded on the Japanese electronics maker midday. The volume represents double the normal volume and more than 10X the number of call options. Noteworthy action is being seen in the October 27.5 puts, with 2,860 contracts traded through midday. With 70 percent traded on the asking price, it appears that call buyers are dominating the action and perhaps hedging shares on concerns about a drop in SNE during the weeks/months ahead.

Unusual Volume Movers
IShares Japan Fund (EWJ) options volume is running 6X the usual, with 40,000 contracts traded and put volume accounting for about 90 percent of the activity.

FedEx (FDX) options activity is running 3X the usual, with 37,000 contracts traded and call volume representing 71 percent of the volume.
M&T Bank (MTB) options volume is running 9X the usual, with 22,000 traded and call volume representing 83 percent of the activity.

Unusual volume is also being seen in Sohu.com (SOHU), Medarex (MDRX), and Blackstone (BX)

Implied Volatility Movers
Bed, Bath and Beyond (BBBY) is seeing relative weakness and higher implied volatility. Shares opened lower and are down $2.95 to $42.17. There is no company specific news to explain the action, but options activity is picking up as well. 2,285 calls and 5,435 puts traded through midday. Implied volatility is up 17 percent to 41.