Mid-day Flow Summary: General Sentiment, Circuit City Stores Inc (CC) & Northwest Airlines (NWA)
General Sentiment
We saw a see-saw market this morning as traders digested retailers' reports and also contemplated crude near $100/barrel. At noon, the broad averages are off about Ω% and the CBOE VIX has lifted to 26.60.
5.2million contracts have traded on pace for a typical 14 million contract day. In addition, call trading leads puts for a slightly bullish bias.
Circuit City Stores Inc (CC)
Friday we noted unusual volume in CC as the stock lifted nearly $1 to $6.51 on early positive ëBlack Fridayí comments. Today the stock started strong, touching a high of $7.04, but quickly faded to a current level just below $6.00.
Options volume is more than double recent levels with flow led by sellers of the Jan-08 7.5 Calls for $.55.
Northwest Airlines (NWA)
Airlines heated up last week and the sector continues to trade very actively today. NWA leads the single stock space with more than 180,000 contracts trading, or 19 times recent average volume in the form of a massive spread on the PHLX.
The stock is currently near $17.55. In this trade, a large institutional customer sold 65,000 December 15 calls & 22000 December 20 calls. At the same time, the customer purchased 35,000 March 17.5 calls for a net debit of just over $10 million.
Existing open interest suggests that this client is "rolling" the long-call positions in December to March, extending a very bullish position on the stock for several months.
Trade history shows that the 65,000 December 15 strike calls were bought in August for $4.50. At the time, the stock was at $18.14 and implied volatility was coming off a multi-year high. Todayís trading price of $3.20 shows that the initiator is willing to commit additional capital to this bullish view.
Posted By: Trade Alert
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About Henry Schwartz
Henry Schwartz has traded derivatives on US and European exchanges for nearly 20 years. His experience includes market-making and institutional trading at the Hull Group, Salomon Brothers, Bear Stearns and most recently Banc of America Securities, where he led the electronic market-making project coincident with the launch of the ISE. His current work involves real-time stream analysis of options market activity for a number of leading institutional sell-side firms.
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