S&Ps Up 9% in September 09-30-2010

Cusick's Corner
What a trading range today, 1133-1155 on the DEC S&P e-minis. It looks like some market players are taking an opportunity to buy some protection after the best September in over 7 decades (9% increase in the S&P this month)! One notable trade was in DELL where the November 12 puts traded over 40K times, looks like it traded on the offer and seems to be a defensive play. If this sector does start to see a slow down and Dell specifically does not make a deal which has been highly anticipated, or sees a slowdown in orders, buying protection for 45 days seems to be worth it for that strategist. Watch the Income and Spending data on pre-open and ISM at 10am ET. See you Midday.

Major averages finished with modest losses on profit-taking and end-of-quarter position squaring. The day's economic news was mostly upbeat. Data released before the opening bell showed second quarter Gross Domestic Product up at an annual rate of 1.7 percent, which was .1 percent better than estimates. Another report from the Labor Department showed filings for jobless benefits falling by 16,000 to 453,000 last week. Economists were expecting a decline of about 13,000. Finally, separate data released later showed the Chicago PMI, a gauge of manufacturing activity, up to 60.4 in September, from 56.7 in August and much better than economists projections of 56.0. The market didn't react much to the data. Instead, investors seemed content banking profit after the Dow Jones Industrial Average gained nearly 8 percent for the month of September. At the closing bell the Dow had lost 47 points on the session. The NASDAQ was down 8.

Bullish Flow
Limelight Networks (LLNW) shares notched a new 52-week high and finished the day up 36 cents to $5.89 Thursday. The Street.com's Jim Cramer interviewed the media company's CEO yesterday and also said he thinks investors should buy LLNW shares. The stock did indeed move higher Thursday and options volume hit 34X the average daily, with about 9,800 calls and 520 puts traded on the session. December 5 calls were the most actives with 5,840 traded. Another 1560 October 5 and 660 December 7.5 calls also changed hands. In addition, according to web site WhatsTrading.com, about 70 percent of the day's call volume in LLNW traded at the offer, which indicates that call buyers were dominating the action as shares moved higher Thursday.

Bullish options action was also seen in Monsanto (MON), American Eagle (AEO), and Sprint Nextel (S).

Bearish Flow
Lender Processing Services (LPS) saw unusual volume Thursday. Shares of the Jacksonville, FL technology company finished the day down 21 cents to $33.23. Meanwhile, options volume rose to 111X the average daily. 9,580 puts and 120 calls traded on the ticker. One of the top trades was a block of 4,500 March 30 puts at $2 per contract, which was initiated by a buyer, according to a source on the exchange floor. At the end of the day, 9,460 contracts had changed hands. Some investors might be buying puts on concerns about the outlook for the company over the next two quarters. The company specializes on technology for the mortgage industry.

Bearish flow also picked up in DELL, Hertz (HTZ), and Micron Technology (MU).

Index Trading
The CBOE Volatility Index (.VIX) edged up .51 to 23.76 Thursday. The market's fear gauge hit a high of 24.52, which was its highest level since the first day of September. VIX hit a low of 20.93 on September 13 and has been grinding higher since that time. Now, with the historically volatile month of October set to begin Friday, VIX seems to be edging higher in anticipation of a bit more volatility during the weeks ahead. Overall levels of market volatility were very low in September. The 20-day statistical volatility of the S&P 500 Index (.SPX), which measures market volatility during the past 20 trading days, is less than 16 percent. Therefore, at 23.76, VIX is very high (almost 50 percent higher) than the market's actual volatility in September. In other words, VIX is telling us to prepare for greater volatility in the month ahead.

ETF Trading
IShares Brazil Fund (EWZ) added 80 cents to $76.95 and EWZ options were active after 53,000 calls and 83,000 puts traded on the exchange-traded fund Thursday. The top trade was a block of 19,600 October 74 puts bought at 88 cents per contract, according to a source on the floor. At the end of the day, 24,600 traded and this put buying might be short-term hedging ahead of Brazil's general elections, scheduled for Sunday, October 3. October options expire two weeks from tomorrow.