Cusick's Corner 11-01-2012

This was a solid day for equity bulls with infrastructure plays from Lumber, Energies, most notably Coal, and Metals, Silver. Guggenheim Lumber ETF (CUT) was again on the move, +1.32%, and is challenging 52 week highs. Silver's move today flags the potential for Gold to resume a potential run to the upside. Non-Farm and Unemployment will come out pre-market, so expect some potential volatility early in the session. See you Midday.
Stock market averages finished with solid gains with help from economic data Thursday. According to a report from the Labor Department released this morning, jobless claims dropped by 9,000 to 363,000 last week. Economists were expecting an uptick to 375,000. ADP also reported that the US economy added 158,000 private sector payrolls in October and about 15,000 more than had been expected. The upbeat news on the jobs front holds some sway because the news comes ahead of Friday's key monthly payroll data as well as next week's Presidential elections. Separately, a report showed third quarter productivity at a better-than-expected 1.9 percent (vs. 1.6 percent consensus). ISM Manufacturing Index rose to 51.7 in October, from 51.5 and more than the 51.0 that was expected. However, construction spending was up .6 percent for September and .2 percent less than expected. And finally, Consumer Confidence was at 72.2 in October and mostly in-line with expectations. In other markets, crude oil ticked up 67 cents to $86.91 on the heels of weekly inventory data, but gold lost $4.5 to 1714.5. Asia and European equity markets were mostly higher, including a 1.4 percent jump in France's CAC 40. On Wall Street, the Dow Jones Industrial Average was up 145 points and held most of the gains through the close. The Dow settled up 137 points and the NASDAQ added 42.8.

Four of the five most actively traded equity options today were call options on Bank of America (BAC). Shares gained 4.5 percent to $9.74 and were the best gainers in the Dow Jones Industrial Average amid a broad market rally. 26 of the Dow 30 stock posted gains on the session. Meanwhile, BAC Weekly 9.5 calls, which are now 24 cents in-the-money and expire after tomorrow, were the day's most actively traded stock options contract. More than 54,000 contracts traded. In addition, volume in Jan 10 calls on the bank topped 52,000. November and December 10 calls were very busy as well. At the end of the day, about 394,000 calls and 102,000 puts traded on Bank of America, a ratio of almost four-to-one.
Bullish trading was also seen in Ford Motor (F), Credit Suisse (CS), and Titanium Metals (TIE).

Green Mountain Coffee Roasters (GMCR) saw an afternoon spike on increasing volume of more than 8 million shares after the company announced plans for a partnership with Costco to launch single cup brew K Cups under the Kirkland name brand. The stock finished up $2.16 to $26.34 and options volume in GMCR was 101,000 contracts. Not all investors seemed to share the bullish sentiment towards the company, however, as Weekly (11/9) $25 puts were the most actives in the name today. 11,200 contracts traded against zero contracts in open interest. The largest trade was a 4000-lot for 85 cents per contract when the market was 78 to 88 cents, possibly a buyer opening a position on concerns the stock will give back today's gains through the end of next week.
Bearish trading was also seen in Sony (SNE), Avon (AVP), and Exelixis (EXEL).
Index Trading

CBOE Volatility Index (.VIX) dropped 1.91 points to 16.69 and has now given back about 56 percent of the 25.3 percent surge seen during the volatile period from 10/18 to 10/23. Today's drop comes as the S&P 500 rallied 15.43 points to 1,427.59. Focus turns to key monthly jobs data tomorrow morning and then Presidential elections next week. There doesn't seem to be too much anxiety building ahead of the events. Overall options volumes in the index market have been light this week. Today, for example, 551,000 calls and 678,000 puts traded on VIX, SPX and other cash index products, which is mostly in-line with the average daily volume for the index pits these days. VIX November 16 puts were the most actives in the index market today. Nearly 40,000 contracts traded.
ETF Action

Call options on the SPDR Financials (XLF) were actively traded. Shares, which represent ownership in all of the financial-related names from the S&P 500, gained 20 cents to $16.09 and a noteworthy trade in morning action was a block of 50,000 Weekly (11/9) 16 calls on the ETF for 21 cents per contract. An investor bought the calls, according to a source on the exchange floor. At the end of the day, 50,337 contracts traded against zero open interest. It wasn't the most active XLF contract of the day, however. That honor goes to the Nov 17 calls. 77,470 changed hands. Volume in the Nov 16 calls on XLF topped 46,000. At the end of the day, 250,000 calls and 94,000 puts traded on the ETF today.
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