Tuesday’s Bullish Trading
General Electric (GE) ticked 12 cents higher to $21.51 in active trading of 42.9 million shares and was one of 26 Dow stocks to move higher Tuesday. On the options front, 62,000 calls and 21,000 puts traded on the stock. The largest trade was a block of 10,000 December 22 calls traded for 14 cents per contract on the International Securities Exchange. Data from the ISE was reporting a customer bought the calls, to open a new position. At the end of the day, volume was approaching 30,000 contracts. Dec 22 calls on GE are now 2.3 percent out-of-the-money and expiring in just 10 days. Tuesday’s increasing interest in the contract comes ahead of GE’s December 17 Investor Meeting.

Bullish trading was also seen in Delta Airlines (DAL), Jet Blue (JBLU), and Clearwire (CLWR).

 

Tuesday’s Bearish Trading
Saks (SKS), the New York-based department store chain, was up 22 cents to $10.84 and options volume on the stock was 5X the daily average. About 6,800 puts and 900 calls traded on the ticker. More than 70 percent of the flow was concentrated in the May 11 puts on the stock. The flow included a 1,500-contract lot for $1.35 per contract when the market was $1.25 to $1.40. The next biggest trade was 671 contracts for $1.30 when the market was $1.20 to $1.30. At the end of the day, 5,500 contracts traded against 256 in open interest. It’s not clear what was driving the increased interest in these near-the-money May puts on Saks. Maybe some investors are taking positions to hedge stock on concerns about a possibly sluggish holiday shopping season in 2012.

Bearish trading was also seen in Informatica (INFA), Discover Financial Services (DFS), and FTI Consulting (FCN).

 

Index Recap
Volumes in the index market finally came back to life, with about 779,000 calls and 601,000 puts traded on the S&P 500 Index (SPX), CBOE Volatility Index (.VIX), and other cash indexes. SPX added 9.29 points to 1,427.84 and VIX, which tracks the expected or implied volatility priced into SPX options, lost .48 to 15.57. The volatility index is now down 16.3 percent over the past month ahead of a seasonally slow period for the equity market in the second half of December. However, not everyone seems convinced that the period of low volatility will last, as the most actively traded index contracts Tuesday were the January and February 32.5 calls on the VIX.

 

Analyzing the ETF Market
Oil Service HOLDRS (OIH) was up 16 cents to $39.19 and options volume on the ETF was 4.5X the daily average. OIH is a fund that holds shares of leading oil drilling companies like Baker Hughes, Schlumberger, and Halliburton. About 26,000 calls and 7,900 puts traded in the product Tuesday. Much of the activity was concentrated in the December 40 calls. More than 17,000 contracts traded against 2,684 in open interest. The largest trade was a 2,482-lot for 35 cents per contract when the market was 25 to 35 cents. It’s not clear was motivating the activity, as Dec 40 calls on OIH are 2.1 percent out-of-the-money and expiring at the end of next week.

 

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