Oops! from Standard & Poor's 11-10-2011

Cusick's Corner
Not that much happened into the close, the markets stayed static even though there were headlines. The most notable headline was Standard & Poor's retraction of France's debt rating downgrade which was due to a technical glitch. The market is still in a fragile state and there's one major concern in the short-term -- if Italy will be able to get some form of austerity agreement tomorrow. While some of us may be getting sick of all the EU headlines, this is the risk that we should consider incorporating into our trading and investing plan. Again, this is a fragile market and I would trade accordingly. See you Midday.

Stock market averages finished higher Thursday and recovered some of the steep losses suffered the day before. Domestic economic news was in focus early after data showed jobless claims declining by 10,000 to 390K last week. Economists were expecting 400K. A separate report showed the Trade Balance narrowing to $43.1 billion in September, from $44.9 billion the month before and much better than the $43.1 billion that was expected. Meanwhile, import prices fell .6 percent in October and .5 percent more than expected. Overall, the economic numbers were good, but volatile trading overseas after Hong Kong's Hang Seng sank 5.25 percent weighed on stock index futures overnight. However, a decline in Italian bond yields helped to ease some of the jitters that sparked Thursday's sell-off across Europe's equity markets and on Wall Street. Meanwhile, Cisco Systems (CSCO) gained 5.7 percent and was the Dow's biggest winner, which helped lift the industrial average to a 113-point gain today. The tech-heavy NASDAQ lagged, however. After losing more than 100 points Wednesday, the NASDAQ added just 3.5 points today.

Bullish
Holly Frontier Corp (HFC), a Dallas, TX oil and gas refiner, gave up 70 cents to $29.77 and is on a four-day 10.8 percent losing skid. The stock stumbled when the company reported earnings Monday and has remained under pressure since that time. Options order flow was interesting today, as overall volume hit 3.5X the daily average. 10,000 calls and 3,035 puts traded in HFC today. November 26 calls, which are 12.7 percent in-the-money and expire at the end of next week, were the most actives. 4,276 traded and 97 percent traded at the ask - suggesting buying interest. Open interest in the HFC Nov 26 call is already 4,012 and so some of the activity is possibly closing trades. December 35 calls and November 31 calls were actively traded as well. Some investors were possibly taking positions in these short-term upside calls on hopes the stock will rebound and recover some of its recent losses in the days ahead.

Bullish trading was also seen in EBAY, Barnes and Noble (BKS), and Hansen Natural (HANS),

Bearish
Focus Media (FMCN) lost 70 cents to $23.90 and puts on Chinese digital media company were actively traded today. Total options volume was more than twice the daily average, with 17,000 puts and 1,000 calls traded on the stock. November 20 puts, which are 16.3 percent out-of-the-money and expire in 8 days, were the most actives. 7,330 traded. November 27, December 25, November 26, and November 18 puts were actively traded as well. Meanwhile, implied volatility in FMCN options was up 8 percent and now elevated at 112 percent. No news on the stock. The heavy interest in November options and higher implied volatility might be a play on earnings. The company reports on November 17 and the day before expiration Friday.

Bearish trading was also seen in Kohl's (KSS), Legg Mason (LEG), and Tanzanian Royalty Exploration (TRX).

Index Trading
Trading in the index market was relatively slow on a quiet day for the equity market Thursday. 425,000 calls and 667,000 puts traded on the S&P 500 Index (.SPX), NASDAQ 100 Index (.NDX) and other cash indexes, which is only about 80 percent the average daily volume, according to Trade Alert data. The S&P 500 Index (.SPX) traded in a 19-point range and gained 10.60 points to 1,239.70. CBOE Volatility Index (.VIX), which surged more than 30 percent yesterday, gave back 3.35 points to 32.81. The three most actively traded index contracts were puts on the volatility index. December 25s traded 30,000 contracts. More than 22,000 traded in both the December 29 and November 32.5 puts as well. Some investors might have been buying puts on the index on the view that yesterday's 32 percent spike in the volatility index was a bit too extreme.

ETF Action
December 45 call option on the iShares Emerging Markets Fund (EEM) was today's most actively traded option. Shares added 26 cents to $39.83 and 146,180 contracts traded. The top trade was a 25,000-contract lot at the 26-cent asking price. Two more large blocks (of 24.5K and 24.3K) traded at 26 and 27 cents. Dec 45 calls on the ETF are 13 percent out-of-the-money and have 36 days of life remaining. The delta of the contract is .13, which equates to a roughly 87 percent probability that the contract will expire worthless. Some investors might be buying these deep out-of-the-money calls on hopes for a rally in equity markets around the globe in the weeks ahead. EEM, which is already up 15.9 percent since October 3, holds shares of companies from developing economies like Russia, Brazil and Korea.