Energy and Finance Lead

Stock market averages moved higher through midday and trading is now mixed heading into the closing bell Thursday. United Healthcare (UNH) is up 6 percent and the best gainer in the Dow Jones Industrial Average on the heels of its profit report. IBM is also up on earnings and helping the Dow forge new record highs. The world’s largest chipmaker Intel (INTC) is seeing post-earnings weakness, however, and weighing on the NASDAQ. On the economic front, the Labor Department reported this morning that jobless claims declined by 24,000 to 334,000 last week, which was better than the 348,000 that was expected. The Philadelphia Fed Survey for July saw a surprise jump to 19.8, from 12.5 last month and much better than the 5.3 that had been expected. Lastly, the List of Leading Indicators for June was unchanged vs. expectations of .3 percent. Overall, the economic data were mostly stronger-than-expected and, in other markets, crude oil is up $1.45 to $107.80 and gold gained $5 to $1282.5. On Wall Street, the Dow was up 100 points midday and has pared its gain to 67 points. The NASDAQ is fractionally lower ahead of earnings from Google and Microsoft after the closing bell.

Today’s Bullish Trading
Medical device-maker Medtronic (MDT) gained 25 cents to $54.65 and options volume on the stock was running 3X the daily average Thursday. Roughly 13,000 calls and 800 puts traded in the name. August 55 calls, which are .6 percent out-of-the-money and expiring in four weeks, were the most active. 5,690 contracts changed hands. July 55 calls traded 4,550 contracts and another 1,485 of the August 57.5 calls also traded in Medtronic. 30-day implied volatility is little changed around 17 and the increased call activity comes after a 33 percent year-to-date rally in the stock. No news on Medtronic to explain the sudden interest in MDT calls and earnings are due out around Aug 20, possibly outside of the August expiration.

Bullish trading was also seen in Cisco Systems (CSCO), Cobalt Energy (CIE), and International Game Technology (IGT).

Today’s Bearish Trading
National Oilwell Varco (NOV) is up 98 cents to $73.06 on light volume of 1.7 million shares late-Thursday and options volume on the oil driller is lopsided. 11,000 puts and 2,500 calls traded on the stock so far. Most of the put flow is focused on November 65 puts and included several smaller lots traded this morning for $1.60 per contract when the market was $1.55 to $1.60. Then, the top trade of the day (a 3360-contract block of Nov 65 puts) printed for $1.66 per contract. 8,114 Nov 65 puts traded on the oil driller so far against 7,854 in open interest. Some investors are possibly buying protective puts on the stock ahead of a July 30 earnings report.

Bearish trading was also seen in Talisman Energy (TLM), Atmel (ATML), and ASML Holdings.

Index Recap
CBOE Volatility Index (.VIX) is off another .10 to 13.68 after the S&P 500 gained 8.75 points to 1,689.69 and notched new record highs Thursday. In the options market, trading in the VIX remains active and call volume is outpacing put volume by nearly 2-to-1. Approximately 360,000 calls and 190,000 puts traded on the volatility index so far. August 15 puts are the most active. 54,400 traded and, with VIX August futures around 15.5, some investors are possibly taking positions on the view that market volatility will remain at relatively low levels over the next few weeks (NOTE: VIX options are priced off of forward values and not the spot or cash index – visit the CBOE web site for all the product specs). Meanwhile, September 23 and August 24 call option on the volatility index are also busy today with more than 50,000 contracts traded in both of those options contracts as well.

Analyzing the ETF Market
iShares Japan Fund (EWJ) saw increased options activity Thursday. EWJ, which holds shares of leading Japanese companies like Toyota and Canon, is up 4 cents to $12.02 and options volume is 2.5X the daily average. 50,000 puts and 46,000 calls traded on the exchange-traded fund. The largest trade is a 45,000-contract block of August 11 puts for 6 cents per contract when the market was 4 to 6 cents. The contract is trading for only 6 cents because it is $1.02, or 8.5%, out-of-the-money and expiring in four weeks. More than 47,000 contracts traded against 8,854 in open interest. Some investors are possibly buying these deep out-of-the-money puts to open new positions for fear that volatility across global financial markets will return in the weeks ahead.