Gold & Silver Continue Move 11-09-2010

Cusick's Corner
As I mentioned yesterday, be prepared for consolidation. At this stage the market has some mythical force that is keeping the trend alive and strong. This overbought nature is real but the trend continues to sustain and it is tough to fade even in the face of over extension. The commodity space, specifically metals, has a mood and move on, GOLD at 1400 that not only seems frenzied it seems to be sustainable. With talk yesterday of moving back the Gold standard by the World Bank President, Gold and Silver have been on a continued tear. These are the catalysts that keep these markets screaming. See you After Hours.

Major averages are holding modest gains in slow trading Tuesday. The only economic stat of the day showed Wholesale Inventories up 1.5 percent in September, and quite a bit more than the .6 percent increase that economists had predicted. The market showed little reaction to the data, however. Beyond that, there hasn't been much news to report. Some of the commodity related names are seeing interest after gold gained $15.7 to $1,418.90 and silver seized $1.25 to $26.68. Agricultural commodities (wheat, oats, soybeans) are also higher after the USDA released its latest November supply/demand forecast. Yet, in the equity market, things are relatively quiet so far. The Dow Jones Industrial Average has traded in a 42-point range and is off 12 points. The NASDAQ added 5. The CBOE Volatility Index (.VIX) lost .26 to 18.03. Trading in the options market remains active, with about 3.5 million calls and 2.2 million puts traded through 11:00 ET.

Bullish
Dryships (DRYS) sees another morning of brisk trading. Shares have added 26 cents to $5.11 and are in the midst of a six-day 25.6 percent rally. Meanwhile, 57,000 calls and 3,630 puts traded on the dry bulk shipper. The action is scattered across a number of November, December and January call options. November 5 calls are the most actives. Some players might be looking for good earnings when the company reports results. No date has been set, but the last report was on July 28. So, the release should surface soon, possibly before the November expiration.

Southwest Energy (SWN) gained $1.55 to $38.79 after Chevron Texaco made a bid for Atlas Energy (ATLS). The news sparked a rally across the oil and drilling space. SWN was among the gainers. Meanwhile, 14,000 calls and 13,000 puts traded in the name through midday, or 2.5X the recent average daily for the name. January 32 puts were the most actives. November 40, January 29 and January 32 calls were actively traded as well.

Bearish
The top options trade so far today is in BofA (BAC). Shares are off 2 cents to $12.58 and one of 16 Dow stocks under water through midday. Meanwhile, a noteworthy trade in morning action is a block of 20,000 November 13 puts at 58-cent asking price. This looks like a buyer, possibly exiting a short put position and or looking for shares of the bank to come under pressure between now and the November expiration, which is in 10 days.

Clearwire (CLWR) shares lost 25 cents to $6.28 and options volume is running 7X the average daily, with about 8,000 puts and 210 calls traded in the name so far. March 5 puts are the most actives, and includes a block of 2,167 contracts at the 50 cent asking price. Looks like a buyer and might be seeing some rolling out of January 5 puts, which have traded predominantly on the bid today. More than 3,000 have now changed hands. No news on the stock today. Earnings were reported on November 5.

Unusual Volume Movers
IShares Silver Fund (SLV) options volume is running 2X the usual, with 262,000 contracts traded and call volume accounting for 62 percent of the activity, according to data from website WhatsTrading.com.

Silver Wheaton (SLW) options activity is running 2X the usual, with 29,000 contracts traded and call volume representing 53 percent of the volume.

Dryships (DRYS) options volume is 5X the typical levels, with 63,000 contracts traded and call volume accounting for 93 percent of the activity.

Increasing volume is also being seen in Priceline (PCLN), Hecla Mining (HL), and Boston Scientific (BSX)

Implied Volatility Movers
Tyson (TSN) shares are down and implied volatility is up after November supply/demand from the USDA sparked a rally in corn and other agricultural commodities. Corn is an important expenditure for TSN and other food companies. Shares are off 36 cents to $15.18 and options volume is 2.5X the average daily, with 9,300 puts and 350 calls traded in the name. Implied volatility is up 7.5 percent to 43.