Cusick's Corner

This is a tight, choppy Quadruple Witching expiration but there have been some big moves in Gold, GLD, and the Euro Currency, FXE. Gold broke out early to the highs but sellers stepped in and have pushed the metal back to the resistance, 1780. The Euro, FXE, was trading much higher pre-open on headlines that a Spanish bailout is potentially close. Could be a quiet expiration Friday afternoon, barring a headline, so keep risk tight and make sure that you have managed any expiring September options.

Market Recap

Stock market averages are holding modest gains with help from gains in overseas equity markets Friday. With no domestic economic news to guide the action, stocks edged higher in morning trading on a report that Spain will unveil a bailout plan on Sept 27. Spanish bond yield are easing and the IBEX equity index jumped 2 percent. The euro added .2 percent to 1.2995 against the dollar. Meanwhile, crude oil gained 59 cents to $93.01 per barrel and gold ticked up $4.5 to $1174.7. It's options expiration Friday, with both options and futures expiring, possibly influencing the market a bit as well. Trading has been quiet so far, however. The Dow Jones Industrial Average has traded in a 50-point range and is up 22 points. The NASDAQ added 15. CBOE Volatility Index (.VIX) is down .17 to 13.90. Trading is active today due to the expiration. 3.6 million calls and 2.6 million puts traded across the exchanges through 11:00am ET.

This Morning's Bullish Trading

Skyworks Solutions (SWKS) is up $1.34 to $25.36 in brisk trading of more than 10 million shares and trying to rebound from an 18.5 percent slide suffered Thursday after the chipmaker updated earnings guidance in morning trading and then said December revenues would be in the mid-single digits in a presentation at the company's 2012 analyst day yesterday afternoon. About 19,000 calls and 4,500 puts traded on the stock so far Friday. September 25 and 26 calls, which are expiring after today, are the most actives. More than 3,000 traded in both contracts. October 26, October 29, and February 27 calls are actively traded as well and implied volatility in SWKS, which jumped 23 percent Thursday, is easing about 9 percent to 53.

Expedia (EXPE) is up $2.90 to $59.99 in active trading of 3 million shares and moving to new 52-week highs today after Deutsche Bank upgraded the online travel company to Buy from Hold. Meanwhile, 8,125 calls and 2,350 puts have traded on the stock, which is more than 3X the daily average. October 60 calls are now almost at-the-money with four weeks of life remaining. 3,955 contracts have changed hands. September 60 calls and October 55 calls on EXPE are seeing interest today as well.

This Morning's Bearish Trading

Masco (MAS), a Taylor, MI building materials company, hit a morning high of $16.48, but erased the early advance and is now flat at $16.08. An interesting options trade on the stock today is a 40,000-contract block of January 15 puts for $1.10 per contract. An investor bought the block, according to a source on the exchange floor, and the puts are tied to a position in 1.4 million shares for $16.22. MAS is notching a new 52-week high today after rallying 22.5 percent since September 5. Today's hefty January downside put buyer seems to be bracing for increased volatility in the stock through the rest of 2012 and into early-2013.

BPZ Resources (BPZ), a Houston, TX oil and gas company, is up 3 cents to $3.23 in relatively active trading of 1 million shares. Typical volume through midday is about 500K. Meanwhile, options volume, which averages about 350 contracts daily, is more than 4,000 contracts so far. 3,510 puts and 540 calls traded on BPZ today. Most of the flow is concentrated in Oct 3 puts and have been in smaller lots traded at the offer – suggesting buying interest. 2,748 now changed hands against just 50 in open interest. The stock has rallied 46.4 percent month-to-date and some investors might be taking positions in puts Friday on concern the stock might dip back below $3 through mid-October.

Volume Signals

Oracle (ORCL) options volume is running 2X the (22-day) average, with 115,000 contracts traded and call volume accounting for 63 percent of the volume.

EMC options volume is 2.5X, the average daily, with 91,000 contracts traded and put volume representing for 79 percent of the activity.

Masco (MAS) options volume is running 41X the average daily, with 44,000 contracts traded and put volume accounting for 97 percent of the activity.

Increasing options activity is also being seen in Skyworks Solutions (SWKS), JDS Uniphase (JDSU), and Skyworks Solutions (SWKS).

Implied Volatility Mover

Implied volatility in the options on KB Homes (KBH) is easing, as shares of the homebuilder rally to new 52-week highs on earnings news. Shares are up $1.14 to $14.25 after the company reported a quarterly profit of 4 cents per share. Analysts were expecting the company to report a 16-cent per share loss. Revenues were slightly better than expectations. The stock is up on the news and options volume is running 3X the daily average. About 20,000 calls and 6,000 puts traded in KBH so far. September 14 and October 12 calls are the most actives, and implied volatility is down 17.5 percent to 51.5.

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