Cusick’s Corner
While Crude was still challenged today, Energy producers, XLE, and oil services, XES, are showing a nice drive to the upside. Global demand could be enough to drive energy markets so I will be keeping an eye on that move in those ETFs. I also am monitoring the move up in the Dollar, UUP, while the Euro, FXE, pulled back into the After Hours. The Euro needs to work a lot harder, get above $1.32, if any rally in the currency will have any salt, and with the consolidation over the last week between $1.32 and $1.30, this could be a potential flag, showing us if the grinding consolidation is still in play for equities. If you see Dollar strength then watch Gold, GLD, this could weigh on the shiny metal. See you Midday.

Stock market averages finished with modest losses, as investors awaited the next news catalyst to drive the action one way or the other. With no earnings of broad market importance, and no economic data until Consumer Credit Tuesday afternoon, the focus was back on Europe Monday morning. European stock market averages, and the euro, were trading lower on concerns Greek isn’t near a deal with creditors. There is mounting concern that the country isn’t doing enough to avoid a looming default, which could potential hurt European banks and roil global financial markets. However, volatility must be on vacation in early-2012, because the worries about the debt crisis failed to stir much movement in the equity market Monday. At the end of the day, the Dow Jones Industrial Average had traded in narrow 68-point range and finished down 17 points. The tech-heavy NASDAQ dipped 3.7 points.

Bullish
MEMC (NYSE:WFR) saw high volume today. Shares of the silicon-wafer maker added 8 cents to $5.27 on 8.2 million shares traded. Typical volume is less than 7 million. Meanwhile, 14,000 calls and 840 puts traded on the stock, which is 3X the daily average for the name. February 6 calls on MEMC are 13.9 percent out-of-the-money, expiring at the end of next week, and were the most actives in the stock today. 7,815 traded against 2,200 contracts in open interest. March 5 and March 6 calls on MEMC were busy as well and levels of implied volatility in the options increased 7 percent to 75. Shares are on a four-day 15.3 percent run higher so far in February and some optimism might be building in the name heading into a February 15 earnings release. However, the company warned on January 18 that it would post a hefty quarterly loss of between 17 and 23 cents per share. Still, call buyers seemed to be active in the name and looking for the stock’s recent rebound to continue. WFR is down about 65 percent from the highs seen in February a year ago.

Bullish trading was also seen in Encana (NYSE:ECA), Dryships (NASDAQ:DRYS), and Dephi Automotive (DLPH).

Bearish
Giliead Sciences (NASDAQ:GILD) has had a strong run and one investor appears to be bracing for a pullback in the stock. Shares of the biotech surged almost 11 percent Friday on positive news related to the company’s Hepatitis C drug. GILD gained another $1.33 to new 52-week highs of $56.02 today and has now rallied more than 50 percent off mid-December lows. The top options trades on the stock today were part of a spread, in which 3,350 May 50 puts were bought for $1.98 per contract and 3,350 May 43 puts sold for 83 cents. The spread, for a $1.15 net debit, appears to be a new position in GILD and possibly a view that shares may fall back towards $43 through mid-May, which represents a 23.2 percent rise over the next 102 days.

Bearish trading was also seen in Popular (NASDAQ:BPOP), Vulcan Materials (NYSE:VMC), and GNC Holdings (GNC).

Index Trading
Not much to report from the index market, as trading was narrow and volume was light Monday. 371,000 calls and 458,000 puts traded across the S&P 500 Index (.SPX), CBOE Volatility Index (.VIX), and other cash products, which is only about 72 percent the recent average daily volume, according to Trade Alert data. The S&P 500 Index (.SPX) traded in a narrow 7-point range and lost .57 points to 1,344.33. Meanwhile, CBOE Volatility Index (.VIX), which fell to multi-month lows Friday, edged up .66 points to 17.76. The most active index contracts were the S&P 500 March 1,340 puts and March 1,340 calls, which are almost at-the-money. Some investors might have been buying the SPX March 1340 straddle (puts and calls) on the view that market volatility, and VIX, may move higher between now and March. VIX tracks the expected or implied volatility priced into S&P 500 options and is down more than 60 percent over the past four months. When it rises, it is a sign that, all else being equal, S&P 500 options premiums are getting more expensive.

ETF Action
SPDR Gold Fund (GLD) lost 46 cents to $167.18 and an interesting spread traded in the exchange-traded fund Monday. Shares, which represent ownership in the actual metal, drifted a bit lower after gold gave up $18 to $1722.50 an ounce. In options action, one strategist sold 7,000 September 170 puts on the ETF at $13.21 and bought 7,000 January 150 puts for $7.56. This Sep 170 – Jan 150 put spread traded again at $5.65 per spread. 13,000 traded total on the International Securities Exchange and data from the exchange indicate a new position was opened. The trade appears to be bullish in the near-term, as the strategist is selling 170 puts, which are 1.7 percent in-the-money. They might expect GLD to recapture $170 through the September expiration and for those puts to expire worthless. At that point, they will be left holding the Jan 150 puts, which they can hold in anticipation of a decline in shares through mid-January 2013. Or they can close out the position entirely by selling the contract. Once opened, an options contract can be closed out any time prior to the expiration (or assignment) through an offsetting transaction.
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