3.5% DOWN DAY – this is ACTION

This Morning’s Bullish Trading

Kraft Foods (KFT) is a bright spot today. Shares are up 90 cents to $35.20 and the only component of the Dow Jones Industrial Average to hold gains after the company posted earnings that beat Street estimates. Kraft also announced plans to spin off its North American grocery business. Shares are up 2.6 percent on the news and touching new 52-week highs today. Options volume in KFT is 14,000 calls and 12,000 puts. Typical volume through midday is about 3,600 contracts. January 34 calls, which are now 3.5 percent in-the-money, are the most actives. 2,480 traded. January 30 puts, August 36 calls, August 35 puts, and January 30 calls on Kraft are actively traded as well.

Mindray Medical (MR), a Shenzhen, China medical instruments company, is down 60 cents to $25.55 and options volume is up ahead of earnings. A 2068-contract block of August 25 calls traded this morning at $1.80 when the market was $1.50 to $1.80. Another 1,500 block traded at $2.30. August 25 calls, which are now 55 cents in-the-money, have now traded 4,436 contracts against only 240 contracts of open interest. 5,380 calls and 1,150 puts now traded in MR, which compares to typical volume of less than 200 contracts. The increased activity might be in anticipation of volatility around earnings. The company is due to report on August 8.

This Morning’s Bearish Trading

LEAP Wireless (LEAP) is slammed for a $3 loss and now trades at $7.04 per share after the company reported an 85-cent per share quarterly loss, which was 35 cents wider-than-expected. While the stock falls to new 52-week lows today, 25,000 puts and 9,565 calls have traded in LEAP so far. The action includes a morning buyer of January [2013] 7.5 puts at $2.25 per contract, 10000X. This appears to be a well-timed put purchase. The market is now $2.37 to $2.81 per contract. 13,145 traded against 12 contracts of open interest.

SPDR Exploration and Production Fund (XOP), which holds shares of major oil companies like Chevron and Exxon, is down $3.11 to $56.62 after crude oil tumbled $4.44 to $87.49 per barrel. A stronger dollar, bearish inventory data yesterday, and concerns about the global economy have conspired to send crude prices sharply lower over the past two days. Meanwhile, XOP options volume is running 4X the average daily. 130,000 puts and 8,800 calls traded in the ETF so far. Most of the action is in the September puts, which expire in 43 days. The 55, 62, 53, 49, and 54 strikes are the most actives.

Volume Signals

iShares Emerging Markets ETF ( (EEM) options volume is running 2X the (22-day) average, with 381,000 contracts traded and put activity accounting for 62 percent of the volume.

Russell 2000 Small Cap Index (.RUT) options volume is 2X the average daily, with 198,000 contracts traded and put volume representing 85 percent of the activity.

US Oil Fund (USO) options volume is running 2X the average daily, with 143,000 contracts traded and put volume representing 62 percent of the total volume.

Increasing options activity is also being seen in US Natural Gas Fund (UNG), Petrobras (PBR), and Sirius XM Radio (XMSR).

Volatility Alerts

Implied volatility in SPDR Gold Trust (GLD) is moving higher on a very volatile day for the yellow metal. Gold made a run higher to a record $1,683 early, but then came under pressure Thursday morning and fell to a low of $1,641. After the dramatic $42 swing, gold is now trading down $6 to $1,659 an ounce. GLD, which an exchange-traded fund that holds the metal, touched new highs today, but was recently down 37 cents to $161.12. Options volume is 305K calls and 225K puts. Implied volatility in GLD options gained 2.5 percent to 19 and is heading towards the highs of this year, which is about 19.5 set in early-May.

Posted in Charting & Analysis, Commentary, Futures, Options, Stocks