Bounce Attributed to Commodity Money Shifting into Equities 05-06-2011

Cusick's Corner
The market bounced nicely after yesterday's slide and that can be attributed to the shifting of money in commodities over to equities, plus Private Payrolls came in much better than expected. But the dollar has firmed, emotions in the EU are starting to flow (as I write this there are rumors that Greece wants to leave the EU zone -- be careful) but these are most likely rumblings that are typical when someone wants better terms to a deal. If the Buck continues to garner strength into the After Hours, critical support levels could be challenged. See you After Hours.

Stocks are broadly higher on better-than-expected monthly jobs numbers. According to the Labor Department, the US economy added 244,000 payrolls in April. Economists were looking for an increase of 185,000. However, the unemployment rate ticked up .2 percent to 9 percent. Economists were looking for the rate of unemployed to stay steady at 8.8 percent. Hourly earnings rose .1 percent and half as much as expected. Still, after losing 224 points in the previous two trading sessions, the Dow Jones Industrial Average rallied around the headline payroll number and is up 115 points midday. The tech-heavy NASDAQ gained 36 points. After several days of heavy losses, crude oil is steady and has added 10 cents to $99.90. Gold gained $6.10 to $1,487.50. The CBOE Volatility Index (.VIX) gave back .71 to 17.49. Trading in the options market remains brisk, with 5.5 million calls and 4.8 million puts traded through 12:30pm ET.

Bullish Flow
iShares Silver Fund (SLV), which suffered a 11.9 percent plunge yesterday, is battling back a bit Friday. Shares are up 27 cents to $33.99 through midday. Options action in the ETF remains heavy. After more than 2 million contracts traded yesterday, SLV volume today is 666,000 calls and 574,000 puts through midday. The May 40 calls, which are 17.6 percent out-of-the-money and expire in two weeks, are the most actives. Volume is 76,600 contracts. The expiring Weekly 35 and 36 calls are seeing very heavy trading as well. Some investors are likely buying out-of-the-money short-term call in SLV in reaction to the recent volatility in the metal and the exchange-traded fund.

Sandridge Energy (SD) shares are down 3.6 percent to $10.29 after the company reported a quarterly loss of 2 cents per share, which was four cents below Street estimates. Options volume is running 4X the average daily, after 60,000 calls and 10,000 puts traded on the Oklahoma City, OK oil and gas company. The top trade of the day was a buyer of 25,000 September 12 calls at 90 cents per contract. It might be a closing trade, as open interest is 29,480 contracts and the call is now 16.6 percent out-of-the-money. That is, the investor might be buying back a short call position on the heels of the earnings miss.

Bearish Flow
Tyson Foods (TSN) options are seeing some interest today. Shares are down 28 cents to $18.94 and options volume is twice the average daily. 6,300 puts and 970 calls traded. May 18 puts, which are 5 percent out-of-the-money with two weeks of life remaining, are the most actives. Volume is approaching 4,000 contracts. Open interest is 1,666 contracts and 83 percent of the volume is trading at the ask, which indicates opening buyers. The bearish flow might be hedging activity ahead of earnings. TSN is due to release results Monday morning.

A noteworthy spread trades in the iShares Taiwan Fund (EWT) today. Shares have added 23 cents to $15.91 and one investor apparently sells 24,000 June 13 puts at 4 cents and buys 24,000 September 14 puts at 35 cents. They paid 31 cents for the spread and might be betting that shares will hold above $13 through the June expiration, but see volatility through mid-September. Or it might be rolling activity - closing out a position in June to open a new bearish position in September, but up one strike price.

Unusual Volume
Sandridge Energy (SD) options volume is running 4X the (22-day) average, with 70,000 contracts traded and call volume accounting for about 86 percent of trades.

Williams Companies (WMB) options volume is 4X the average daily, with 68,000 contracts traded and call volume representing for 96 percent of the activity.

Sirius XM Radio (SIRI) options volume is running 3X the average daily, with 58,000 contracts traded and call volume accounting for 86 percent of the activity.

Increasing options activity is also being seen in Priceline (PCLN), CVBS, and Starbuck's (SBUX).

Implied Volatility Mover
Visa (V) is trading higher and implied volatility is lower after the credit card company reported a quarterly profit of $1.23 per share, which beat Street estimates by 3 cents. The company also authorized a $1 billion stock buyback program. Visa is up 54 cents to $79.24 on the news. Options volume is 23,000 calls and 8,000 puts. Implied volatility has eased 11 percent to 23.90.