Friday’s Bullish Trading
Bank of America (BAC) is seeing another day of very heavy trading. As noted earlier, 325 million shares and 900,000 contracts traded on the bank Thursday. The stock is up 1.3 percent to $9.52 and one of 16 Dow stocks holding gains, as trading is turning a bit mixed heading into the closing bell Friday. Meanwhile, 307 million shares and 1.1 million options contracts traded on the bank Friday. BAC September 10 calls are the day’s most actively traded equity options contract. More than 116,000 contracts have changed hands. The contract is 48 cents, or 5 percent, out-of-the-money and expiring at the end of next week. Some investors might be taking positions in the contract on hopes the rally in Bank of America will continue through next week’s Quadruple Witch expiration. The stock has already gained nearly 20 percent in just 7 days.
Bullish trading was also seen in Monster Wordwide (MWW), AIG, and Xilinx (XLNX).
Friday’s Bearish Trading
AK Steel (AKS) isn’t participating in the day’s rally. Shares are down 57 cents to $5.87 after the steelmaker lowered its third quarter guidance and said it now expects a 60 to 65-cent per share loss for the period. Trading is very active in AK Steel on the news. 20 million shares and about 14,500 options contracts traded in the name. The flow includes 9,450 calls and 4,075 puts. October 7 calls are the most actives. 1,810 contracts traded against 1,838 in open interest. Some investors might be liquidating positions, as the contract is falling 19.3 percent out-of-the-money and expiring in 5 weeks. September 6 puts are the next most actives in AKS. 1,620 contracts changed hands.
Bearish trading was also seen in Research In Motion (RIMM), Nike (NKE), and IMAX.
Index Recap
The S&P 500 (SPX) gained another 5.78 points to 1,465.77 and is at its best levels since December 2007. CBOE Volatility Index (VIX), which tracks the expected volatility priced into SPX options, edged up .48 to 14.53, as market action is perhaps becoming a bit more volatile amid much higher volumes in the options market. Data from Trade Alert late Friday show about 16.5 million calls and 9.9 million puts traded across the exchanges, representing one of the busiest days for 2012. Just a few weeks ago, on August 28, volumes fell to their lowest levels in over a year when less than 8.5 million contracts traded. So Friday’s volume represents more than triple the volume seen on that day. That’s probably welcomed news for market makers and other options professionals. The surge in volume might also motivate larger market gyrations, as volume and volatility often go hand-in-hand.
Analyzing the ETF Market
Options volume skyrocketed on the PowerShares Bullish Dollar Fund (UUP) Friday. The ETF is off a dime to $21.65 late in the day on heavy volume of 5.5 million shares. Meanwhile, 437,000 calls and 13,000 puts traded in UUP. By way of comparison, average daily volume for the ETF during the past month was about 8,000 contracts! Upside Oct 22 calls have seen an impressive amount of activity. More than 381,000 contracts changed hands. The contract is now 35 cents out-of-the-money and expiring in 5 weeks. The fund has not performed well lately, as the dollar has been weakening against other currencies. UUP tracks the buck against other majors and is heavily-weighted against the EUR/USD pair. The extreme volume in upside calls on the ETF seems to reflect expectations for dollar strength (euro weakness) in the weeks ahead.
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