Cusick's Corner

Picking a top is going to be tough but there is short-term resistance building at this stage of the market advance, 1313.50 on the S&Ps. Bias in the market is going to be hard to shift, and I am not suggesting that there is much out there to buck the trend either. Over the weekend and coming into this week I did weigh the potential impact of the Fed meeting, especially with more information coming out on Greece, and whether there really is a QE3 on the table or has the market done the work already that QE would potentially stimulate. If this is the case and the Fed was not serious and only is using QE as a carrot, then the market may not take too kindly. Now this is a big "if", but if I am a long-term holder, I just might want to look at some potential insurance looking out into March or June. I am not fighting the tide, just like to add a life preserver. See you After Hours.

Market Recap

Stock market averages are holding modest losses on a relatively slow news day. The first economic stat of the week is a report on Pending Home Sales, due out Wednesday. The earnings calendar is busy, but this week's flood of profit reports doesn't begin until after the closing bell today. Meanwhile, EUR/USD recaptures the 1.30 level and markets were modestly higher across key Eurozone markets. UK's FTSE paced the modest advance with a gain of .9 percent. Crude oil is up 85 cents to $99.18 and gold gained $13.7 to $1,677.7 an ounce. On Wall Street, however, the Dow Jones Industrial Average has surrendered early gains and is down 42 points. The tech-heavy NASDAQ lost 10 points. CBOE Volatility Index is up .92 points to 19.20. Overall options trading is active to start the week, with 4.9 million calls and 4.4 million puts changing hands by 12:15pm ET.

This Morning's Bullish Trading

Chesapeake Energy (CHK) shares gained $1.04 to $22 after the company announced a new operating plan that will involve natural gas production cuts. The news from the United States' second largest natural gas producer helped send natural gas prices, which were falling to 10 year lows last week, up 12 cents to $2.46. Meanwhile, CHK shares are trading higher and trading the options is busy, with 33,000 calls and 17,000 puts traded on the stock so far. The top trade is 2500 January 2013 $30 calls traded at the $1.22 asking price. 4,700 now traded, as some investors are possibly taking positions and looking for the stock to recapture the $30 level through January 2013. CHK is down 38.2 percent from the 52-week high of $35.61 seen in February 2011.

Marvell Technology (MRVL) shares ticked 8 cents higher to $15.61 and calls on the stock are actively traded through midday Monday. 24,000 contracts traded, which is more than 6X the days call volume and 4X the typical call activity for the chipmaker. February 16 calls, which are 2.5 percent out-of-the-money and expiring in 25 days, are the most actives. 11,360 traded. Weekly (1/27) 16 calls, Feb 17, and Mar 18 calls are seeing interest as well. No news on the stock today. But some investors appear to be buying upside calls on Marvell in anticipation of a move higher in the underlying shares. The company is expected to next report earnings in mid-to-late February.

This Morning's Bearish Trading

McMoran Exploration (MMR) shares are down 56 cents to $12.81 and came under pressure today after JP Morgan downgraded the stock to Underweight from Neutral. Options volume on the New Orleans, LA oil and gas company is running 6.5X the daily average, with 64,000 puts and 16,000 calls traded in the name so far. The top trade is a February – March $12 put spread bought for 64 cents, 10000X. The strategist sold 10,000 Feb 12 puts on the stock and bought 10,000 March 12 puts, possibly betting that shares will hold above $12 (-6.3%) through the February expiration and then move lower from that point forward. Or, it's possibly rolling activity – i.e. closing out February puts to open a new bearish position in March.

SPDR 500 Trust (SPY) is up 33 cents to $131.21 and options on the ETF are busy today, with 791,000 puts and 453,000 calls traded in the product so far. The top trades look like a ratio spread, in which the strategist bought 20,000 February 131 puts on SPY and sold 40,000 June 111 puts, collecting an average of $1.99 on this bearish 1X2 put ratio spread. The position is possibly an adjustment or closing trade, because open in interest is sufficient to cover in both contracts. If opening, the spread would pay off well if shares fall below $131 through the February expiration (25 days), but not below $111 through mid-June.

Implied Volatility Mover

Trading is active in Leap Wireless (LEAP) and implied volatility in the options on stock is moving higher Monday. The stock isn't doing much, up 9 cents to $9.77 and volume of 529,000 shares. Typical share volume through midday is 1.2 million. Yet, 7,425 options traded on the stock, which is 3X the norm. The action has been in smaller lots and seems to be dominated by premium buyers. The top trade is 136-lot of April 10 puts for $1.44. February 8 puts and February 10 calls are the most actives. Meanwhile, implied volatility jumped 13 percent to 78.5, suggesting some investors are bracing for shares to possibly LEAP higher or lower in the weeks ahead.

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