Stock market averages scored solid gains on a busy day of economic and earnings news Thursday. A number of large caps, including GM, Facebook (FB), Visa (V), Seagate Tech (STX), and Prudential (PRU), were higher in the wake of their respective results. On the economic front, data released early showed jobless claims at 324,000 last week, down from 342,000 and much better than the 346,000 that was expected. The report seemed to hold more sway than normal because it comes ahead of key monthly jobs numbers tomorrow. Separately, fourth quarter Productivity was up .7 percent, from -1.7 percent and below expectations of 1.2 percent. However, the Trade Balance narrowed to $38.8 billion for March, from $43.6 billion and more than the $43 billion that was expected. Trading across Europe was steady after the ECB cut rates. Crude oil rallied $3 to $94 and gold gained $20 to $1466.5. On Wall Street, the Dow Jones Industrial Average was higher through midday and extended the gains into the close. At the bell, the Dow was up 131 points and 3 points from session highs. The NASDAQ added 41.5 points.
Today’s Bullish Trading
Electronic Arts (EA), the Redwood City, CA video game-maker, saw increased options activity Thursday. The stock was up 24 cents to $17.54 on relatively light volume of 2.25 million (3.1 million is the daily average). Yet, options volume was almost 3X the daily average. Roughly 12,000 calls and 500 puts traded in the name. Most of the flow was concentrated in June 20 calls. Several small trades printed midday for 21 and 22 cents per contract. Then, a 9700-contract block on June calls traded on EA for 23 cents per contract on the International Securities Exchange. An investor bought the calls, to open, according to data from the ISE. At the end of the day, more than 10,000 June 20 calls traded on EA against 1,152 in open interest. Positions are being opened ahead of the company’s May 7th earnings report. The stock was up 4.3 percent on January 31 when the company last reported and has rallied an additional 11.5 percent since that time. 20-strike calls on the stock are now 14 percent out-of-the-money.
Today’s Bearish Trading
EBIX.com (EBIX), an Atlanta, GA business software developer, dropped $1.09 to $19.51 today on heavy volume of 5 million shares on a Bloomberg report that the company is possibly being scrutinized for accounting related issues. The stock, which was up yesterday on reports Goldman wants to take the company private for $20 per share, came under fire and options volume was 20X the daily average. 24,000 puts and 5,100 calls traded on EBIX. Sep 19, Jun 19 and May 18 puts were the most actives and 30-day implied volatility in the options on the stock jumped 82 percent to 26.5.
Overall volumes didn’t impress Thursday, including in the index market. The S&P 500 (SPX) moved up 14.89 points to 1,597.59 and is within striking distance of the 1,600 level. About 310,000 calls and 535,000 puts traded in the S&P 500 pit. Jun 1575 and 1525 puts were the most active contracts on the S&P. Meanwhile, CBOE Volatility Index (.VIX), which tracks the expected or implied volatility priced in SPX options, was down .90 to 13.59. Trading in the VIX pit included 337,000 calls and 122,000 puts. May 17 and 27 calls were the most active, as an investor apparently sold the May 17 – 27 call spread on VIX early this morning at 58 cents, 37500X. If so, the activity might be closing out a position that was opened on March 21 when an investor had purchased the same spread on VIX for $1.30, 40000X.
Analyzing the ETF Market
US Natural Gas Fund (UNG) saw increasing volume amid an uptick in volatility Thursday. Natural gas prices dropped 27 cents to $4.05 today in the wake of weekly inventory data. UNG, which is an exchange-traded fund designed to track the commodity’s price with futures contracts, lost $1.45 to $21.91 on increasing volume of 15 million shares. In options action, 40,000 calls and 42,000 puts traded on UNG. May 21 puts were the most active in the ETF. 4,795 contracts traded. The flow was scattered across a number of other contracts as well, including May 23 puts, Jun 23 calls, Weekly 23.5 calls, May 23 calls, May 22 calls, May 22 calls, Weekly 22.5 calls, Oct 26 calls and Weekly 23 puts.