Japanese Prints 10-05-2010

Cusick's Corner
The Bank of Japan turned on the printing press, which in turn adds more fuel to the Gold markets (GCZ10). The move by the Japanese and the reaction of the Yen (JYZ10) which is still going up has lead market players to continue to doubt the power of paper and relative safety of the precious metals. Gold could see $1350 very quickly, especially since the Dollar (DXZ10) continues to fall. Keep an eye on the US Dollar, if it continues to tumble this could hurt US exporters, especially domestic exporters of Wheat (MWZ10) and Soybeans (SX10). See you Midday.

Stocks are broadly higher on economic data, rallying commodities prices, and positive analyst commentary about bank earnings. Miners and energy-related names are seeing strength after crude oil added $1.16 to $82.63 a barrel and gold surged another $23.50 to $1,340.30 an ounce. Meanwhile, the only economic stat of the day showed the ISM Services Index up to 53.2 in September, from 51.5 in August and much better than the 51.8 that economists had expected. Some of the big banks are also seeing gains after JP Morgan analysts said they expect strong third quarter earnings from the group. BofA (BAC) is one of twenty-nine Dow stocks moving higher (only American Express is lower) and the industrial average is up 173 points midday. The NASDAQ gained 50. The CBOE Volatility Index (.VIX) lost 1.64 to 21.89. Trading is active, with about 5.3 million calls and 4.2 million puts traded by 1:00 ET.

Bullish
The top equity options trade so far today is in Citigroup (C). Shares are up a dime to $4.13 after JP Morgan analysts said they expect strong third quarter earnings from several large banks thanks to mortgage banking revenues and net interest income. The firm raised their price target on Citi. Meanwhile, the top options trade of the day is a block of 40,000 Citi December 4 calls bought at 31 cents per contract, according to a source on the exchange floor.

ConAgra (CAG) adds 27 cents to $22.27 and ConAgra call options are seeing a day of brisk trading. 7,760 contracts traded so far, which is 14X the typical volume and compares to just 135 put options. December 24s are the most actives with 3,660 contracts traded and 93 percent of the volume trading at the asking price, which looks like call buyers are dominating the action. October 22, January 22.5, and January 24 calls are seeing interest as well. Implied volatility is up 5 percent to 20, but with no news on the ticker to explain the bullish trading Tuesday.

Bearish
Bunge (BG) shares hit a low of $54.80 Tuesday morning on reports Argentina officials are looking at possibly making arrests at the company related to tax evasion allegations. Shares have since recovered the losses and are trading up 7 cents to $57.70. Meanwhile, the underlying tone in the options market seems somewhat defensive, as about 13,000 puts and 3,890 calls traded in the name so far. October 50 and 55 puts are the day's most actives.

The bloodletting continues for Lender Processing Services (LPS). As noted in Friday's wrap, put buyers surfaced in the name late last week. The action continued yesterday. Today, LPS is down another $3.00 to $25.75 and has given up 22.5 percent since Thursday. The ongoing weakness seems to be related to concerns about default-related services offered to mortgage lenders. Shares have been reeling and today's options volume includes 5,577 puts and 868 calls, or about 8X the norm for midday.

Unusual Volume Movers
Yahoo (YHOO) options volume is running 2.5X the usual, with 78,000 contracts traded and call volume accounting for 75 percent of the activity, according to data from website WhatsTrading.com.

UPS options activity is running 3X the usual, with 54,000 contracts traded and call volume representing 86 percent of the volume.

Newmont Mining (NEM) options volume is 2.5X the typical levels, with 49,000 contracts traded and put volume accounting for 57 percent of the activity.

Increasing volume is also being seen in China Mobile (CHL), Ross Stores (ROST), and Cavium Networks (CAVM).

Implied Volatility Movers
Wilmington Trust (WL), a Wilmington, DE regional banks, is seeing higher implied volatility and active put trading Tuesday. Shares are off 11 cents to $8.66 and options volume is 51X the typical levels, with 6,120 puts and only 42 calls traded in the name so far. Meanwhile, implied volatility surged 40 percent to 65.