Mixed Session 10-18-2012 After Hours

Cusick’s Corner 10-18-2012 After Hours

What if I were to say that GOOG- 8%, AAPL -1.86%, IBM -2.83% and the S&Ps -.38% – yes – only down .38%? I can tell you this, most of you would tell me that the market would be down big and you would be turning to bearish plays. This says something that even if you knew the information, would you have been right on your play? It would have been tough playing any bounce with a ton of conviction today, but the market has held up on some unprecedented action. Watch the Housing data out after the open. Also tomorrow is the settlement for many indices at the open and it’s the last day to trade Oct options on equities.

Stock market averages have slipped off midday highs and a 9 percent drop in Google (GOOG) is weighing in the NASDAQ. Shares took a hit after the search giant pre-released its quarterly earnings report and, after a steep drop, GOOG has been halted to sort through the mess. Meanwhile, the Dow Jones Industrial Average had forged a modest gain midday following a round of mixed economic data. According to the Labor Department, weekly jobless claims increased to 388K in the period ended 10/13, from 342K the week before and well above expectations of 360K.

However, a separate report released later showed the Philadelphia Fed Survey of manufacturing activity improving to 5.7 this month, from -1.9 and better than the -.1 that was expected. Finally, List of Leading economic indicators was up .6 percent in September and .4 percent better than expected. Trading was sluggish across most Eurozone equity markets and the euro slipped back to 1.31 on the buck. Crude oil is up 25 cents to $92.84 per barrel, but gold lost $8.4 to $1744.6. On Wall Street, the Dow Jones Industrial Average has given back its midday gain and is now down 20 points. With 90 minutes left to trade, the tech-heavy NASDAQ is down 34.5 points.

DISH Networks (DISH) has seen a flurry of activity today. The stock is up $1.13 to $35.25 and to new 52-week highs in active trading of 4.7 million shares. By way of comparison, average daily volume is about 2.3 million. Meanwhile, options volume is running 7.5X the daily average after about 33,000 calls and 2,550 puts traded on DISH today. November 35 calls, which are now 25 cents in-the-money and expiring in 29 days, are the most actives on the stock today. 9,850 traded against 7,829 in open interest. October 35, October 36, and January 34 calls are the next most actives in DISH. No headlines to explain the heightened activity in the stock Thursday. The company is expected to report earnings again on November 5.

Bullish trading was also seen in Hologic (HOLX), Vodaphone (VOD), and Wells Fargo (WFC).

Options activity picked up in RR Donnelly (RRD) intraday Thursday. Shares fell sharply, to $10.10, after Google blamed its earnings pre-release on the printing company. RRD is now down 26 cents to $10.59 in heavy trading of 8.3 million shares. By way of comparison, average daily volume in RRD is 1.8 million shares. Meanwhile, 21,000 options traded on the stock, which is 12.5X the daily average. About 17,000 puts and 4,000 calls so far. October 10 and 11 puts are the most actives in the Chicago-based printing and publishing company.

Bearish trading was also seen in Lamar Advertising (LAMR), Smithfield Foods (SFD), and Dollar Thrifty (DTG).

Index Trading
Trading in the index options market is active today due to the expiration. The settlement values for many cash index products like the S&P 500 Index (.SPX) are computed using Friday morning stock prices. Therefore, the last day to trade the contracts is the Thursday before expiration Friday. About 780,000 calls and 720,000 puts traded across all index products. SPX October 1,450 puts and calls are the most actives. The index is down 6.65 to 1,454.27 and some investors were liquidating positions in these near-the-money contracts before they expire.

ETF Action
Oil Service Holders (OIH) are up 20 cents to $41.31 and some investors are possibly looking for a drop in the ETF before the weekend. Morning trades on OIH included several lots of October 41 puts, which are 31 cents out-of-the-money and expire after tomorrow. More than 27,000 contracts now traded against 14,072 in open interest. If shares hold at $41 or above through the end of this week, the contract expires worthless and any premium paid is lost (unless it is closed out before the expiration). OIH is a fund that holds leading oil drilling and service companies. Two of its important components – Baker Hughes (BHI) and Schlumberger (SLB) – are due to release earnings Friday morning.


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Joe Cusick