Market Listless, Waiting on Elections & Fed

Cusick's Corner
The market stayed in a tight range going into the After Hours. But Oil, CLZ10 $81.94, in the short-term looks coiled for some potential upside, especially with the indecision that surfaced in the market after yesterday's close. With no data coming out, the market will start to get ready for the upcoming elections and the Fed meeting next week. See you Midday.

Major averages chopped around and finished mixed Thursday. Stocks moved broadly higher in morning trading after the Labor Department reported that filings for jobless benefits fell by 21,000 to 434,000 in the week ended October 23. Economists were expecting an increase of about 3,000. Yet, the early gains were short-lived and a modest round of selling pressure had surfaced by mid-morning. At midday, the Dow Jones Industrial Average was down 56 points and off 108 points from session highs. There was no specific catalyst for the decline, but trading remains cautious ahead of key events over the next six days, including a flood of earnings, GDP numbers tomorrow, FOMC meeting next week, November mid-term elections, retail sales, and monthly jobs numbers. However, the Dow did find some support late in the day and finished down just 16 points, up 57 points from session lows. The tech-heavy NASDAQ added 4.

Bullish Flow
USEC (USU) finished the day up 42 cents to $5.38 and options volume surged to 9X the recent average daily Thursday. 8,290 calls and 2,150 puts traded on the producer of enriched uranium for power plants. The top trade of the day was a purchase of a block of 700 January $4 puts at 20 cents per contract. Beyond that, however, most of the action was in January 6 call options -- 5,920 traded on the day at 30 and 35 cents per contract (95 percent traded on the ask) and implied volatility surged 25 percent to 60. Investors were buying premium and taking positions in the name, perhaps hoping for good news when the company releases earnings on November 2. The stock was also trading higher after the company said that the Department of Energy is near to reaching a decision regarding a loan guarantee for an American Centrifuge Plant.

Bullish options action was also seen in VALE, Eastman Kodak (EK), and BP.

Bearish Flow
Put volume surged in Halliburton (HAL) on news the oil driller knew of potential problems with well cement that was partly to blame for the massive Gulf spill in April 2010. Shares tumbled to an afternoon low of $28.86 and finished the day down $2.74 to $31.68. Options volume hit 9.5X the recent average daily. 165,000 puts and 111,000 calls traded on the oil driller. November 30 and 31 puts were the most actives, as some wary investors scrambled to buy premium on fear of additional downside. Meanwhile, implied volatility rallied nearly 50 percent to multi-month highs of 50, as the market is now pricing in the possibility for additional volatility in Halliburton shares in the weeks ahead.

Bearish flow also picked up in Floserve (FLS), Vivus Pharmaceuticals (VVUS), and Potash (POT).

Index Trading
Morgan Stanley Retail Store Index (.MVR) has seen two days of increasing activity. 1,100 December 200 call options traded on the index yesterday. Today, MVR lost 1.15 to 193.25 and options volume hit 50X the recent average daily. Again, the action was in the December 200 call options. 4,500 contracts traded on the session. Most of the activity was in smaller lots trading at the asking price of between $5.90 and $6.10 per contract. It seems that at least one options investor is accumulating a position in these calls, perhaps looking for the index to rally beyond 200 before the December expiration. It might be a play on monthly retail sales data and same store sales results due in early-November.

ETF Trading
Financials Select Sector Fund (XLF) saw some noteworthy trades today. Shares finished down a penny to $14.57 and one investor bought a block of 50,000 December 15 calls at 35 cents per contract in early morning trading. Another noteworthy trade later in the day was a buyer of 14,000 January 2012 13 – 18 call spreads at $2.10. That is, they bought 14,000 of the January 13 calls that expire in 2012 at $2.63 and sold the higher strike 18 calls (also 2012s) at 53 cents. This spread is a bullish longer-term play on the ETF. It offers a max pay-off of $2.90 (excluding commissions) if the financials rally in 2011 and XLF settles above $18 in mid-January 2012.