Cusick's Corner

As we limp into the midday, equities, from a short-term perspective, are mixed at best. It started early in the overnight with mixed global data and became more choppy as domestic data rolled out pre-open. With a severe lack of any upside catalyst and mixed data, recent entrants into the equities markets may come under some pressure. As I mentioned yesterday, the Relative Strength in the market is waning and now are getting to resistance levels, 50% retracement off of the September lows on the S&Ps that is becoming hard to break. The Crude markets, which are highly correlated with the equities, are not helping, trading at their worst levels of the day and breaking $90 for only the second time in two months. The Euro Currency, FXE, is challenged into the midday -- breaking short-term support, 20-Day Simple Moving Average (SMA) 128.38 and looking to potentially challenge long-term support, 200-Day SMA 127.65. See you After Hours

Market Recap

Stock market averages shook off morning weakness and are holding modest gains through midday. The news flow remains light, but some of the early focus was on economic data. A report released this morning from ADP showed the private sector adding 162K jobs in September which was better than the 133K that was expected. A bit later, ISM Services Index, a gauge of economic activity outside of manufacturing, printed at 55.1 from September – up from 53.7 in August and better than the 53 that was expected. Trading was mixed across the Eurozone and the euro is flat at 1.291 against the dollar. Crude oil is down $2.97 to $88.92 on the heels of weekly inventory data, but gold gained $4 to $1779.5 an ounce. On Wall Street, the Dow Jones Industrial Average slipped in the first hour, but has since erased the losses and is up 36 points – 79 points from session lows. The NASDAQ gained 14. CBOE Volatility Index (.VIX) is off .39 to 15.32. Overall options volumes do not impress, with about 2.45 million calls and 2.1 million puts traded across the exchanges through 11:15am ET.

This Morning's Bullish Trading

Ford Motor (F) is up 18 cents to $9.97 and options order flow on the automaker is interesting today, as call volume is outpacing put activity by a ratio of more than ten-to-one. About 47,000 calls and 4,600 puts have traded in Ford today. Players are revved up about the Weekly 10 calls that expire on 10/5. More than 30,500 contracts have traded against 20,464 in open interest. The contract is 3 cents out-of-the-money and, after today, has two days of life remaining. If Ford recaptures $10.01 or more, the contract will be in-the-money before it expires. If not, the contract has no intrinsic value and expires worthless. Players are possibly taking positions in the contract in anticipation of Ford's next short-term moves, which will probably be driven by overall market conditions and jobs data Friday. Ford reported monthly auto sales numbers yesterday.

Ocwen Financial (OCN) is up $4.81 to $33.77 and new 52-week highs in heavy trading of 6 million shares after announcing plans to acquire Homeward Residential Holdings. The deal is expected to be immediately accretive to earnings. Investors applauded the deal and sent OCN sharply higher. Meanwhile, options volume on the Atlanta, GA savings and loan is 4X the daily average. 11,000 calls and 2,700 puts traded in the name. October 30, January 35, and October 35 calls are the most actives.

This Morning's Bearish Trading

MetroPCS (PCS) lost $1.03 to $12.54 and giving back 39 percent of the gains seen yesterday on reports the company was in talks with T-Mobile. The stock fell today after the company confirmed that it will combine with T-Mobile. The deal will involve a reverse stock split and paying shareholders $4.09 per share, before the split. The stock is down, as investors were possibly looking for better terms and options volume on PCS is running 30X the daily average. 66,000 calls and 50,000 puts now traded on the stock. The top trade is a Nov 12 – 13 strangle at 95 cents, 25000X. In this strategy, the investor apparently sold 25,000 November 12 puts on the stock at 55 cents and sold 25,000 November 13 calls at 40 cents. The short strangle is not necessarily a bullish or bearish play on PCS, but seems to be a view that shares will stay in a range in the weeks ahead. Falling implied volatility and time decay would work in the strange writer's favor.

Live Nation (LYV) loses 14 cents to $8.40 and one investor bought a 19,000-contract block of October 7.5 puts on the stock for 25 cents per contract. Open interest is 21,679 contracts and so today's premium purchase might close a short position in the contract. Shares of the Beverly Hills, CA entertainment company are down 8.3 percent since mid-September and today's put buyer is possibly concerned that the stock may suffer additional losses and fall below $7.5 through the October expiration (which is in just two and a half weeks).

Volume Signals

MetroPCS (PCS) options volume is running 25X the (22-day) average, with 97,000 contracts traded and call volume accounting for 52 percent of the volume.

HCA options volume is 18X, the average daily, with 60,000 contracts traded and put volume representing for 79 percent of the activity.

US Airways (LCC) options volume is running 3.5X the average daily, with 35,000 contracts traded and put volume accounting for 75 percent of the activity.

Increasing options activity is also being seen in Cemex (CX), Delphi Automotive (DLPH), and Monsanto (MON).

Implied Volatility Mover

Implied volatility in the options on Align Technology (ALGN) is moving higher amid increasing activity in the puts on the Santa Clara, CA medical instruments company. The stock isn't doing much, up just 6 cents to $38.22 on volume of 490,000 shares. Yet options volume is 7X the daily average. About 9,800 pu9ts and 290 calls traded in ALGN today. October 31 and 39 puts are the most actives in the name and 30-day implied volatility in the options on the stock is moving up 34 percent to 62.

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