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2010-03-04

Materials And Emerging Markets Were Today’s US Stock Market Leaders

The bid held this afternoon into the final hour push. This is becoming a consistent theme and this lack of conviction leads to potential frustration ― over trading and just flat out abandoning your method/plan. Do not allow this environment to let that happen, stay focused on positioning within your plan. Who were the leaders today? Materials and Emerging Markets helped hold modest gains into the end of the day, which was in front of some Claims data that is due out pre-market tomorrow at 8:30am EST, potentially adding some early morning volatility. Stay on your toes ― see you Midday.

Stocks traded higher on upbeat economic data, but the early gains faded in afternoon action and the major averages finished mixed Wednesday. Stocks found some support early after ADP reported that the US economy lost 20,000 private sector jobs in February. Economists were looking for a larger 50,000 drop. Then, the early advance was extended when ISM reported that its services index rose to 53 in February, up 50.5 the month before and better than the 51.0 reading that economists had expected. Both the Dow and NADSAQ moved to session highs on the news, but from there trading turned choppy and the remainder of the session can be characterized as a slow grind lower. By the closing bell, the Dow Jones Industrial Average was down 9 points and the NASDAQ lost .11. The S&P 500 finished fractionally higher.

Bullish
Call volume jumped in Taubman Centers (TCO: 37.89 -0.32 -0.84%). Shares of the Bloomfield Hills, MI retail REIT lost 32 cents to $37.89 and 4,150 calls traded on the session. The volume represents 32X the recent average daily and compares to just 32 puts. June 50 calls were the most actives. 3,160 traded and, with nearly all of the volume traded at the asking price, it looks like call buyers were dominating the action. The premium buying might be to hedge short positions. Or, some speculators might be betting on additional strength in TCO. Shares have staged an impressive 18.2 percent rally since February 9 and Wednesday the company announced it would pay a 41-cent per share dividend on its common stock.

Bullish trading was also seen in RadioShack (RSH: 21.03 +1.16 +5.84%), TIVO, and GameStop (GME: 17.85 +0.36 +2.06%).

Bearish
Barnes Group (B: 16.67 -0.06 -0.36%), a Bristol, CT aerospace and industrial equipment maker, lost 6 cents to $16.67 and options volume rose to more than 50X the recent average daily, with 4,530 puts and only 93 puts traded on the session. September 7.5 puts, which are 55 percent out-of-the-money, saw the bulk of the action. 4,330 traded and with almost two-thirds of the volume traded at the asking price, it seems that put buyers were taking positions and perhaps taking out some "disaster insurance" should shares tumble in the months ahead.

Bearish trading also surfaced in Macy's (M: 20.03 +0.03 +0.15%), Humana (HUM: 47.49 0.00 0.00%), and OSI Pharmaceuticals (OSIP: 56.64 -0.36 -0.63%).

Index Trading
Index options activity has been picking up a little. 571,000 calls and 657,000 puts traded across all the cash indexes Wednesday. 215,000 calls traded on the CBOE Volatility Index (^VIX: 18.83 0.00 0.00%). The index, which tracks the expected volatility priced into S&P 500 index options, edged down .23 to 18.83 and suffered its 15th loss in 16 trading sessions. Some options players are positioning for a rebound, however. For example, one of the top trades in the VIX was a May 27.5 - 35 (1X2) call ratio spread that traded 10000X. The investor bought 10,000 May 27.5s and sold 20,000 May 35s, which creates a bullish position with a max pay-off if VIX rallies to 35 by the May expiration.

ETF Trading
An impressive call writer surfaced in the PowerShares Bullish Dollar Fund (UUP: 23.51 -0.14 -0.59%) Wednesday. The fund, which is an ETF that tracks the dollar against a basket of other currencies, lost 14 cents to $23.51 and an investor sold 51,000 March 23 calls at 47 cents each. Open interest in the contract is almost 350,000 and one of the largest OI positions in any option contract. So, this investor might be selling the calls to close a position and avoid the risk of losses should UUP shares fall before the March expiration (16 days.)

 

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