Equity Markets at Even Keel 04-06-2011

Cusick's Corner
Action in Asia and the EU overnight and into the morning was positive enough to keep the equity markets at an even keel. There also has been a lot of action in Gold, GCJ11 +6, which is being built into a lot of portfolios as a currency play or a market uncertainty play. We are also seeing some decent activity in Natural Gas, QGK11, now that the Nat Gas act is back in play in Washington. Nat Gas has been under some pressure but this could be the catalyst that is needed to establish some support for the commodity. See you After Hours.

Stocks are trading mixed midday. With no major earnings reports or economic stats to guide the action, some of the attention remains on the commodities. Gold prices rose to another record and were recently trading up $4.50 to $1457 an ounce. Crude oil is also making a run to higher levels and hit $109 per barrel on weekly inventory data. Meanwhile, technology stocks are seeing relative strength after Cisco (CSCO) CEO John Chambers promised to take "bold steps" to shift the company's focus (see Bullish Flow). Cisco is up 4.1 percent and leading the Dow Jones Industrial Average to a 17-point midday gain. However, the tech-heavy NASDAQ is flat. The CBOE Volatility Index (.VIX) is down .29 to 16.96. Overall options volume is running about the typical levels, with 4.8 million calls and 3.8 million puts traded through 12:30pm ET.

Bullish Flow
Cisco Systems (CSCO) is the Dow's best gainer and options are heavily traded today. Shares are up 4.4 percent to $17.98 after CEO Chambers sent a memo to employees Tuesday vowing to shift more focus to key markets. Some Wall Street analysts now believe that Cisco will begin to divest some businesses. Shares are up on the news today and options volume is impressive, with 333,000 calls and 105,000 puts traded in Cisco through midday. CSCO April 18 calls and May 20 calls are today's two most actively traded equity options. June 20 calls are seeing heavy trading as well.

JC Penney (JCP) shares are up 19 cents to $36.94 and options are busy today ahead of March same store sales results. A number of retailers will be releasing their results Thursday morning. About 13,000 calls and 4,000 puts have traded In JCP ahead of the news. April 39 calls, which are 5.6 percent out-of-the-money and expire in nine days, are the most actives. 6,150 traded. April 38 and 40 calls are seeing interest as well.

Bearish Flow
While JC Penney is seeing bullish trading, Gap Stores (GPS) is seeing some defensive options order flow Wednesday. Shares of the retailer are down 9 cents to $23.01 and the top trade of the day is a 2374-contract block of April 23 puts on the International Securities Exchange, which was bought-to-open, according to ISEE data from the exchange. The contract, which is now at-the-money, has traded 8530X. Out-of-the-money April 22 puts are seeing interest as well. Some investors might be taking positions in ATM and OTM puts ahead of the same store sales numbers due Thursday morning.

An interesting spread traded in the SPDR Retail Trust (XRT) as well. XRT is an exchange-traded fund that holds a basket of different companies from the retail sector. Shares touched a new 52-week high Wednesday morning, but were recently down a nickel to $51.92. Meanwhile, in options action, one investor sold 40,000 May 49 puts at 67 cents. They also bought 20,000 May 47 puts at 37 cents and 20,000 May 51 puts at $1.27. The action creates a 1X2X1 May 47 - 49 - 51 put butterfly spread that makes its best profits if shares of the ETF fall to $49 through the May expiration.

Unusual Volume
Cisco (CSCO) options volume is running 2.5X the (22-day) average, with 437,000 contracts traded and call volume accounting for about 76 percent of trades.

UnitedContinental (UAL) options volume is 4X the average daily, with 70,000 contracts traded and call volume representing for 75 percent of the activity.

Monsanto (MON) options volume is running 4X the average daily, with 69,000 contracts traded and call volume accounting for 59 percent of the activity.

Increasing options activity is also being seen in Marvell Tech (MRVL), Goldcorp (GG), and CVS.

Implied Volatility Mover
Skyworks Solutions (SWKS) is seeing volatility today. Shares of the Woburn, MA semiconductor company opened lower after an analyst said the company's content might be much less in the upcoming iPhone 5 compared to iPhone 4. Shares are down $3 to $27.88 and options are actively traded as well. 18,000 puts and 7,800 calls traded in SWKS so far today. May 30 puts, which are now more than 7 percent in-the-money, are the most actives. 4,200 traded. Meanwhile, implied volatility in Skyworks options jumped about 12 percent to 36.