Cusick's Corner

The market bounces into the midday post Debate and sectors like Energy, XLE/KOL, seem to have been given a little boost in the short run. What is lagging into the midday is the Tech sector, QQQ, which makes it hard to believe that the upside will have much in the way of momentum without the Tech segment leading. Another market that continues to push ahead is Gold and that could be from the comments from the EU as well as the weakening Dollar. Either way, the metal looks like it wants to challenge $1800. Right now the trend is still to the upside in spite of the continued mixed data and sentiment that's equally as mixed, so with that said, hard to debate the current environment. See you After Hours.

Market Recap

Stock market averages are holding gains following reassuring words from ECB President Mario Draghi and ahead of the release of minutes from the latest Federal Reserve meeting. After concluding a meeting on monetary policy, Draghi again pledged to buy bonds to help troubled Eurozone nations. Stock market averages are little changed across European equity markets, but the euro edged up .75 percent to 1.30 against the dollar. In the US, the domestic economic data showed jobless claims increasing by 4,000 last week to 367K and 2,000 more than expected. Factory Orders for August showed a decline of -5.2 percent, which is not as bad as the -6 percent that was expected. Wednesday's Presidential debate has also been a topic of discussion among traders, with the market possibly reacting possibly reacting possibly to the pro-business, small government talk from Presidential hopeful Mitt Romney. Next, attention turns to the release of the Fed minutes from the latest FOMC meeting due out this afternoon. The Dow Jones Industrial Average is up 65 points and 34 points from session highs. The NASDAQ gained 14. CBOE Volatility Index (.VIX) is off .39 to 15.32. Overall options volumes are picking up from the slow pace seen in previous days, with about 3.3 million calls and 2.7 million puts traded across the exchanges through 11:15am ET.

This Morning's Bullish Trading

Alcoa (AA) has added 28 cents to $9.06 and is one of 25 Dow stocks trading higher through midday Thursday. Options order flow on the aluminum-maker is interesting, as 45,000 calls and 6,170 puts traded in the name so far, a ratio of more than seven-to-one. October 9 calls, which are now 6 cents in-the-money and expiring in 15 days, are the most actives. 28,400 contracts traded. November 9 calls are the second most actives. 8,370 changed hands. Players are possibly taking positions after the stock's move higher today and in anticipation of Alcoa's quarterly earnings report. The company unofficially kicks of the earnings reporting season on October 9.

Applied Materials (AMAT) loses 7 cents to $11.10 and options volume on the stock is running 4.5X the daily average, being driven by an October – November 11 call spread for an average of 20.5 cents, 6000X. The investors apparently sold 6,000 October 11 calls on the stock for an average of 29.5 cents and bought 6000 November 11 calls for 50 cents. The spread appears to be a roll. That is, the investor was holding a position in the in-the-money October 11 calls and is now opening a new similar position in November to give the trade one more month to play out.

This Morning's Bearish Trading

Hewlett Packard (HPQ) is down again today. Shares tumbled yesterday afternoon after the company's CEO offered disappointing revenue guidance at the computer-maker's 2012 Analyst Day. HPQ is off another 6 cents to $14.84 and active trading in the options market continues. 89,000 calls and 95,000 puts traded on the stock, which is 3X the daily average for the name. October 14 puts, which are 5.6 percent OTM and expiring in 15 days, are seeing the most volume. 19,160 contracts traded. Not all of the flow is bearish, however, as Oct 17 and Nov 15 calls are busy as well.

MBIA (MBI), the mortgage insurance company, is up 29 cents to $10.79 and options volume on the stock is 4X the daily average, with 16,000 puts and 2,290 calls traded on the name so far. One player bought a 14000-lot of Jan14 $5 puts on the stock for 57 cents per contract. Looks like an opening buyer, perhaps taking out some "disaster insurance" on concerns about a possible drop in the stock next year.

Volume Signals

Hewlett Packard (HPQ) options volume is running 2.5X the (22-day) average, with 158,000 contracts traded and put volume accounting for 52 percent of the volume.

Williams Companies (WMB) options volume is 4X, the average daily, with 105,000 contracts traded and call volume representing for 87 percent of the activity.

MetroPCS (PCS) options volume is running 8.5X the average daily, with 87,000 contracts traded and call volume accounting for 88 percent of the activity.

Increasing options activity is also being seen in Marathon Oil (MRO), Arch Coal (ACI), and Gap Stores (GPS).

Implied Volatility Mover

Implied volatility in the options on MetroPCS (PCS) is moving higher amid active trading in the options on the stock. After a big jump Tuesday, shares fell yesterday 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 was down again today, then halted, and is up 13 cents to $12.37 now that trading has resumed. Options volume on the stock is running 8X the daily average, with about 75,000 calls and 10,000 puts traded on the ticker so far. January 10 calls, November 13 calls, and February 12 calls are the most actives and implied volatility in PCS options jumped 25 percent to 53.5.

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