Stock market averages gave up modest midday gains and finished with losses Monday. Trading was a bit cautious early after European markets moved mostly lower to start the week and the only domestic economic stat of the day showed Durable Goods down 7.3 percent for July, which was worse than the -5 percent that was expected. Meanwhile, the earnings calendar is light this week and Qihoo 360 Tech (QIHU) was the only name out with results Monday. The stock rose 7.8 percent. A merger was also announced, after Amgen (AMGN) said it was buying Onyx Pharmaceuticals for $125 per share in cash, which sent ONXX up 5.6 percent. Elsewhere, crude oil was down 17 cents to $106.25 and gold gained $6 $1402. On Wall Street, the Dow was up 30 points midday, but then faltered in the afternoon session amid headlines that Secretary of State John Kerry wants to hold Syria accountable for using chemical weapons. Stocks wobbled on worries about the escalating tensions and, at the closing bell, the Dow had wiped out all of the day’s gains. The industrials finished down 65 points, near session lows.
Dow Chemical (DOW) continues to see higher call volumes. Approximately 31,000 calls and 9,500 puts traded on the stock Thursday. 55,000 calls and 15,000 puts changed hands Friday. DOW was off 9 cents to $38.65 today and another 31,000 calls and 7,250 puts traded on the chemicals company today. While January 39 calls saw the biggest increase in open interest Thursday and September 41 calls were the most actives Friday, January 42 calls were the busiest DOW options today. 8,150 contracts traded. Weekly 40, September 39, and September 38 calls were also actively traded. It’s not clear what is motivating the high call volume in Dow Chemical in recent days, as there are no obvious headlines to explain the activity. Shares have performed well lately and notched new 52-week highs of $39.20 Monday morning.
Bullish trading was also seen in Macy’s (M), Nokia (NOK), and Radioshack (RSH).
CF Industries (CF), a Deerfield, IL agricultural chemicals company, was up $2.77, or 1.4 percent, to $197.07 amid strength in the sector Monday. Other names like POT, MOS, and IPI were also trading higher on the day. In options action, order flow in CF was lopsided, as about 11,000 puts and 3,000 calls traded on the ticker. The top trade was a 2700-lot of November 170 puts for $3.05 per contract. At the end of the day, more than 6,500 November 170 puts traded on CF against 857 in open interest. The stock is up nearly 17 percent from early-July lows and some investors are possibly buying Nov 170s as a type of protective put or hedging strategy after the recent move higher in the stock.
Bearish trading was also seen in Chesapeake (CHK), Auxillium Pharmaceuticals (AUXL), and Hovnanian (HOV).
CBOE Volatility Index (.VIX) saw an afternoon spike and finished up 1.01 points to 14.99 after the S&P 500 (.SPX) faltered late in the day and finished down 6.72 points to 1,656.78. Overall options volumes were very light, however. 423,000 calls and 469,000 puts traded on VIX, SPX and other cash indexes, which is only about two-thirds the average daily volume for the past month, according to Trade Alert data. The ten most active index options were all VIX contracts, being led by Sep 14 puts, Sep 16 calls and the Sep 19 calls.
Options volume in the iShares EFEA Fund (EFA) was 2.5X the daily average Monday. EFA, which holds a basket of companies from Europe, the Far East, and Australasia, was off 45 cents to $61.12. On the options front, 110,000 puts and 3,340 calls traded on the ETF. Much of the put volume was due to one spread trade, in which the investor sold 32,700 Sep 58 puts on EFA at 22 cents, bought 32,700 October 59 puts for 71 cents and sold 32,700 October 56 puts at 31 cents. In other words, they sold Sep 58 puts and bought Oct 56 – 59 put spreads. The activity is probably rolling and closing out Sep puts that expire in 25 days. Meanwhile, the investor is also opening an Oct 56 – 59 put spread in anticipation of additional volatility across global financial markets in the weeks ahead.