Tuesday 1/25/2011 Wrap Up

Stocks battled back from morning weakness to finish mixed Tuesday. Investors digested a flood of earnings news early, including reports from five components of the Dow Jones Industrial Average. American Express (AXP) lost 2.2 percent and was the biggest loser in the Dow after the company late-Monday reported a 94-cent quarterly profit, which was 3 cents shy of expectations. 3M (MMM) was the second biggest loser, falling 2 percent, on earnings. However, Verizon (VZ), Traveler's (TRV) and DuPont (DD) saw post-earnings strength. Meanwhile, on the economic front, the Conference Board's Consumer Confidence Index surprised to the upside. It rose to 60.6 in January, from 53.3 in the final month of 2010 and much better than economist estimates of 53.5. Although investors seemed to shrug off the data and stocks were broadly lower at midday, buyers surfaced in the second half of trading. At the end of the session, the Dow Jones Industrial Average was down just 4 points and 78 points off session lows. The NASDAQ battled back from negative territory and finished with a 1.7 point gain.

Bullish Flow

Clean Energy (CLNE) shares gained 10 cents to $13.37 and bullish options activity picked up ahead of a CNBC interview with T. Boones Pickens scheduled for Wednesday. The activist investor owns 28 percent of CLNE and might have something to say about the company during the interview (unconfirmed). Today's options activity was focused on February and March calls. Only 265 puts traded on the Seal Beach, CA gas utility company. February 14s were the most actives and traded almost 2,000X. Another 1,053 March 15 calls changed hand. In addition, 64 percent of the day's total call volume traded at the asking price, according to data from options web information site WhatsTrading.com, which indicates that call buyers were dominating the trading activity and positioning for a higher share price for Clean Energy Tuesday.

Bullish trading was also seen in Murphy Oil (MUR), Juniper Networks (JNPR), and Star Scientific (CIGX).

Bearish Flow

Salient Pharmaceuticals (SLXP) saw an increase in options volume Tuesday. Most of the action was driven by one spread trader. In this play, the investor apparently bought 1,450 March 40 puts at $3.00 each and sold 1,450 March 35 puts at $1.45. With shares up 30 cents to $41.96, this Mar 40 – 35 put spread, for a net debit of $1.55, is possibly a short-term hedge ahead of March 7 FDA PDUFA review date for the company's Xifaxantreatment for irritable bowel syndrome. Earnings are expected around the same time.

Bearish flow also surfaced in Nordstrom (JWN), Aflac (AFL), and Bebe Stores (BEBE).

Index Trading

Mini-NASDAQ 100 Index (.MNX) hit a morning low of 222.80, but battled back to finish the day up .36 to 230.40. Options volume in the index rose to 5X the recent average daily. 12,000 puts and 1,700 calls traded on the day. The top trades were part of a spread, in which the investor apparently bought 3,000 March 225 puts at $4.30 and sold 3,000 March 205 puts at $1.09. The spread, for a net debit of $3.21, might be a straight bearish bet or perhaps to hedge a portfolio of NASDAQ stocks. MNX is a cash-settled index equal to 1/10th the value of the Nasdaq 100 Index (.NDX), which consists of the 100 largest non-financial names that trade on the NASDAQ Stock Market.

Posted in Futures, Options, Stocks