Mama Mia Market! 11-09-2011

Cusick's Corner
Italy is weighing on the psyche of the bid. We are heading to levels in the equities, 1233 on the S&Ps, where if broken could trigger a potential challenge to mid-term support of 1200 on the S&Ps. I will be watching the Dollar strength, UUP, to see if this ramps up pressure in the red hot precious Metals, Gold/Silver. The shakeout in both these markets has been orderly and while the downside could continue today, it looks like there is support down at these mid-term levels so I want to see if the bid resurrects at that point. See you After Hours.

Stock market averages fell sharply after Italian bond yields hit a key level of more than 7 percent Wednesday. The rise in yields parked renewed concerns about the severity of the European Debt Crisis and sent the EUR/USD currency pair sliding 1.7 percent. European stock indexes also suffered losses. Germany's DAX paced the decline with a 2.2 percent drop. Events on the other side of the Atlantic continue to overshadow the domestic economic news, which included a surprise .1 percent drop in Wholesale Inventories for September. Economists were looking for a .5 percent increase. Beyond that, it's been a relatively slow news day on Wall Street. The volatility in the equity market is due to the European debt mess. The Dow Jones Industrial Average is down 235 points and the NASDAQ lost 61. CBOE Volatility Index (.VIX) jumped 4.42 points to 31.90. Overall options volume is running about the typical levels, with 4.2 million calls and 4.9 million puts traded across the exchanges through 12:45pm ET.

Bullish Flow
American Superconductor (AMSC) is seeing relative strength and increasing options action after the Devens, MA wind and power grids products company reported a 44-cent per share third quarter loss, which was not as bad as the 57-cent per share loss that was expected. AMSC is trading up 42 cents to $4.49 and options volume on the stock is running 10X the daily average. 8,450 calls and 1,965 puts traded in AMSC so far today. November 5 calls, which are 11.4 percent out-of-the-money and expire at the end of next week, are the most actives. 2,160 traded. Nov 3, Nov 4, Dec 5, and April 6 calls on the stock are seeing interest as well. Some players might be taking positions in the short-term calls on hopes the post-earnings rally and the stock's rebound will continue in the days ahead. Shares have been reeling in 2011 and are down 84.2 percent year-to-date.

Skyworks Solutions (SWKS) shares jumped 6.5 percent to $21.83 last-Thursday on earnings news, but after a three-day skid, have given up the entire gain. Shares are down $1.03 to $20.10 today and a noteworthy options trade in the chipmaker Wednesday is a November 20 - 21 call spread, apparently bought for 55 cents, 4000X. In this spread, the strategist bought 4,000 Nov 20 calls on the stock for $1.05 and sold 4,000 Nov 21 calls at 50 cents. The potential payoff (excluding transaction costs), is 45 cents (difference between strikes minus the debit), if shares rally back beyond $21 through next week's options expiration.

Bearish Flow
SuccessFactors (SFSF) is up 14 cents to $27.29 today and some players seem to view today's relative strength as an opportunity to buy puts on the San Mateo, CA business software developer. The focus is on the March 26 puts, which have traded more than 7,000 contracts against just 10 contracts of open interest. The top trade is a 700-lot traded at $3.50 per contract when the market was $3.30 to $3.50. Meanwhile, implied volatility in SFSF options has risen 6 percent to 50, as some investors in the options market seem to be buying downside puts on concerns about the outlook for the stock through March 2012. The company is presenting today at a Wells Fargo Technology, Media, and Telecommunications conference.

The top equity options trade today is in General Electric. GE is down 2.7 percent to $16.02 and one of thirty Dow stocks trading lower. Not a single component of the industrial average is higher today. Meanwhile, the largest equity options trade in the options market through midday Wednesday is a 22,200-contract block of December 15 puts traded at the 32-asking price, which is possibly a bet that shares will continue falling and dip below $15 (-6.4%) through the December expiration (37 days).

Unusual Volume
GM options volume is running 2.5X the (22-day) average, with 85,000 contracts traded and call activity accounting for 59 percent of the volume.

3M (MMM) options volume is 3X the average daily, with 38,000 contracts traded and put volume representing 66 percent of the activity.

Jefferies (JEF) options volume is running 2X the average daily, with 37,000 contracts traded and put volume representing 86 percent of the total volume.

Increasing options activity is also being seen in Adobe (ADBE), Netease (NTES), and Intermune (ITMN).

Implied Volatility Mover
Implied volatility in ING is moving higher, as shares of the Amsterdam-based bank slide on concerns about the unfolding European Debt Crisis. Shares are down $1.02 to $7.59 and options volume in the stock is running 3.5X the daily average. December 8 puts are the most actives. 1,052 traded. Nov and Dec 9 calls are the next most actives. Meanwhile, implied volatility in ING options is up 26 percent and once again elevated at 90. A 52-week high in ING implied volatility of roughly 110 was set on 9/12.