Cusick’s Corner: Missing The Mark

Stock market averages suffered losses in rather volatile trading Wednesday. Weakness across the Eurozone and uninspiring earnings reports set the table for morning losses on Wall Street. Stock indexes moved broadly lower across the Eurozone, including 2.3 percent declines in France’s CAC 40 and Germany’s DAX. Europe’s markets fell for a fourth day amid ongoing concerns about the risks of a slowing global economy to corporate profits. In the US, much of the focus is on earnings. Bank of America (BAC) was down 4.7 percent and the Dow’s biggest loser in the wake of its report. Intel (INTC) finished flat and Yahoo (YHOO) suffered a modest post-earnings loss. Apple (AAPL), which is now trading at fresh 2-year lows, weighed on the NASDAQ after losing 5.5 percent. Meanwhile, the The Dow Jones Industrial Average was off 150 points and finished down 138 points.

Today’s Bullish Trading

Nokia (NOK) might be a name worth watching tomorrow. The company is due to release earnings and trading on the Finnish multi-national communications company was very busy today. The stock was up 14 cents to $3.58 on heavy volume of 56.4 million shares. Meanwhile, 95,000 calls and 54,000 puts traded on the stock, which is almost 4X the daily average. May 3.5 calls, which are now 8 cents in-the-money and expiring in 29 days, were the most actives in NOK. 36,775 contracts changed hands. May 3.5 and 4 calls saw heavy trading as well and implied volatility was up 5 percent to 75. The April 3.5 straddle on Nokia, which expires the day after the company reports, trades at about 10 percent of the spot price, or for 35 cents. Therefore, a relatively large post-earnings move might be expected. NOK dropped 8.2 percent on 1/24 when the company last reported.

Bullish trading was also seen in Pulte Group (PHM), Noble Energy (NE), and Sprint (S).

Today’s Bearish Trading

Home Loan Servicing Solutions (HLSS), a George Town, KY mortgage investment company, was down 5 cents to $22.46 and options volume on the stock was 30X the daily average Wednesday. About 5,500 puts and 380 puts traded on the ticker. The largest trade was a block of 2200 April 20 puts for 20 cents per contract. At the end of the day, 5160 contracts traded and data from the all-electronic International Securities Exchange is indicating opening customer buyers. If so, the activity is unusual. The contract is $2.46 out-of-the-money and expires in just two days.

Bearish trading was also seen in American Agency Capital (AGNC), Tyson Foods (TSN), and Sotheby’s (BID).

Index Trading:

CBOE Volatility Index (.VIX) saw active trading. The index, which tracks the implied volatility priced into a strip of S&P 500 Index (.SPX) options, was up 2.55 points to 16.51, as the S&P 500 drops 22.56 points to 1,552.01. VIX April options expiration was today and the settlement print was 15.86. While that’s the highest of 2013, it is also well below today’s highs. Most of the gains in the index Wednesday occurred after the settlement value was computed. Meanwhile, trading was relatively active in the VIX pit, as some positions are now being opened in later months after the April contracts came off the board. 623k calls and 336K puts traded in the VIX pit Wednesday, according to Trade Alert data.

Analyzing the ETF Market

The oil service space might be worth watching later this week, as one of the biggest names in the sector will be reporting earnings. Schlumberger (SLB) is slated to report Friday morning. Trading in Oil Service HOLDRS (OIH) was interesting today ahead of the results, as volume was 4.5X the daily average. 24K calls and 29K puts traded on OIH today. April 40 calls, which will have one trading day of life remaining after SLB reports, were the most actives in OIH. 14,590 traded, as it appears that some investors were paying 30 cents per contract to open new positions. Oil Service HOLDRS is a type of exchange-traded fund that holds leading companies from the sector and was down $1.35 to $39.68. SLB accounts for nearly 20 percent of the fund’s portfolio. The stock was down $2.32 to $70.97.