Cusick's Corner 10-11-2012 Midday

The market turned early on good Claims data and the market has been reacting to economic issues (now that the Fed is out of the way) like this -- when it is good, the market is positive and vice versa. There's been some active trading in Treasuries, TLT, the long bond action did not go well so rates are popping in the 30-year and prices are falling in fixed income. We are also seeing nice upside in the commodities, JJG/UNG, after bullish reports on Corn and Nat Gas Supplies. Coal has also been on the move since the last debate and the rise of Romney in the polls. Tech continues to lag, so this is tempering any true bullishness at this stage. See you After Hours.
Stock market averages are holding modest gains with help from economic data on 10/11/12. Stock index futures strengthened before the exchanges opened Thursday morning after the Labor Department said that jobless claims fell to 339K last week, from 369K and much better than the 370K that were expected. Separately, the Trade Balance for August showed an increase to $44.2 billion, from $42.5 billion and a bit more than the $43.8 billion that was expected. A third piece of data showed import prices climbing more than expected last month. The jobs data seemed to hold the most weight, however, and equity markets are getting lift across the Eurozone as well. A 1.4 percent move in France's CAC 40 Index is leading the advance. The euro edged up .4 percent to 1.293 against the dollar. Crude oil prices ticked 70 cents higher to $91.95 and gold gained $4.7 to $1769.8. On Wall Street, the Dow Jones Industrial Average has added 27 points and the NASDAQ is gaining 8.5 points. Trading in the options market is active, with 3.5 million calls and 2.6 million puts traded across the exchanges through 11:30am ET.
Bullish Flow

Sprint Nextel (S) rallied 77 cents to $5.81 on very heavy volume of 358 million shares on media reports Softbank is possibly looking to make a substantial investment in the phone company. The stock surged at the open and is holding most of the gains through midday. Meanwhile, 446,000 calls and 106,000 puts traded on the stock so far. Some of the more actives today are the October 6 calls which are now 19 cents out-of-the-money and expiring at the end of next week. More than 89,000 contracts traded. November 6 calls are the second most actives. 78,654 contracts changed hands. November 7, January 6, and Weekly 6 calls on Sprint are seeing brisk trading as well.
Coal stocks are hot again today. Alpha Natural Resources is leading the sector, up $1 to $8.31, in very active trading of 26.5 million shares. Meanwhile, 33,000 calls and 16,000 puts traded in the name. October 8 calls on the stock are now 31 cents in-the-money and expiring in 8 days. 4,425 contracts traded. January 10 and 11 calls are the next most actives today. The jump in the stock appears to be part of a broader sector play. The Market Vectors Coal ETF (KOL) is up 3.8 percent.
Bearish Flow

AT&T (T) is down 29 cents to $36.63 and one of eight Dow stocks underwater midday. Verizon (VZ) is down 1 percent and the biggest loser in the industrial average. Weakness in the two stocks might be related to the Sprint news and concerns about increasing competitive pressures if Sprint does indeed receive a sizeable investment from Softbank. For whatever reason, AT&T shares are down and some investors appear to be bracing for additional losses. 43,000 puts and 10,000 calls traded on AT&T today. November 37 puts are the most actives in Ma Bell. 14,860 contracts changed hands. January 37 puts are the second most actives. 9,000 have now traded.
Time Warner (TWX) is off 15 cents to $45.19 and some investor are tuning in to the November 44 puts on the media company. The largest trade is 4000 contracts for 70 cents per contract when the market was 68 to 71 cents. 6,130 now traded against 223 in open interest. Implied volatility in the options on the stock moved up 3.5 percent to 20.4. Some investors are possibly taking positions in downside November puts on TWX to help hedge earnings risk. The company is due to report earnings the morning of November 7.
Unsusual Volume

Sprint Nextel (S) options volume is running 6.5X the (22-day) average, with 424,000 contracts traded and call volume accounting for 78 percent of the volume.
MetroPCS (PCS) options volume is 3X, the average daily, with 140,000 contracts traded and put volume representing for 52 percent of the activity.
AMD options volume is running 3X the average daily, with 46,000 contracts traded and call volume accounting for 96 percent of the activity.
Increasing options activity is also being seen in Clearwire (CLWR), NRG, and Barnes and Noble (BKS).
Implied Volatility Mover

Implied volatility in the options on MetroPCS (PCS) is moving up today, as the stock falls 49 cents to $11.55 in active trading of 28 million shares. The weakness is being attributed to the Sprint news, as an investment by Softbank might prevent Sprint from making a counter-bid for PCS. There had been talk that Sprint is interested in MetroPCS and would make an offer for the company after Deutsche Telecomm agreed last week to merge its T-Mobile business with PCS. In short, diminishing hopes for a deal with Sprint seems to be weighing on MetroPCS. Shares are down about 5 percent. Trading in the options is brisk as well. 77,000 calls and 77,000 puts so far. Implied volatility is moving up 21 percent to 52.
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