US Markets Rebound Slightly In After Hours Trading

Going into the After Hours the market has firmed up and bounced off the lows. The 2nd quarter performance has been impressive and the driver for the most impressive Quarter performance in almost a decade. But as of late the market has been in a tight range, which can explain the drop off in volatility as gauged by the VIX, which has pulled back 34% YTD. We have had four months of positive month over month returns on the indices but we are now in a consolidation that is pressuring the upside to 930 and the low end 910. This may be a range that we need to be patient with for the near future while the market digests this impressive rally and plot out next steps. Tomorrow we will have some economic numbers that could add some more volatility to the markets with the ADP Employment Change for June at 10:00 EST, ISM Index for Jun at 10:00 EST, Pending Home Sales for May at 10:30 EST, and finally Crude Inventories for the week of 06/26. See you Midday.

After Hours

Stocks finished lower after a report on consumer confidence showed a surprise drop during the month of June. The index, released 30 minutes into the trading session, fell to 49.3, down from 54.8 and well below expectations of 55.3. The data sent stocks lower and volatility higher. The weak reading packed some punch because it comes ahead of key data Wednesday and Thursday. Reports on manufacturing (ISM), pending home sales, and construction spending are due out Wednesday. Key monthly jobs data are scheduled for Thursday. Trading turned cautious ahead of the news. The Dow Jones Industrial Average lost 82 and the NASDAQ gave up 9. The CBOE Volatility Index (^VIX) fell to 25.02 early, but finished up 1 point to 26.35. Volume picked up from the slow pace seen Monday, with approximately 6.1 million calls and 5.5 million puts traded on the exchanges.

Bullish

Ford Motor (F) calls have seen two days of action ahead of monthly auto and truck sales numbers, due out tomorrow afternoon. Shares of the automaker added 29 cents to $6.07 ahead of the news. In the options market, 52,000 calls and 17,000 Ford puts traded on the session. Trading was brisk in July 6 and August 7 calls. Buyers dominated the trading and the activity seemed to reflect hopes that, after several months of dismal results, Ford might show better numbers for June. Bullish trading also picked up in Novavax (NVAX), Cavium Networks (CAVM), and Geron (GERN).

Bearish

MSCI (MXB), a New York-based investment information company, saw bearish flow Tuesday. There was no news on the day, but options volume rose to 150X the normal levels. 17,000 puts and 95 calls traded. Shares finished down 11 cents to $24.44 and the focus was clearly on the September 22.5 puts, with 16,684 contracts traded, compared to open interest of 26. About 60 percent of the volume hit ask-side of the bid-ask spread, suggesting buyers were opening positions in the puts. The bearish flow comes ahead of a July 2 earnings report. Bearish trading also surfaced in SINA, CBS, and NVidia (NVDA).

Index Trading

In the midday report, we highlighted an usual trade in the NASDAQ 100 Index (.NDX). At that time, we noted “an investor sold 15000 December 2000 - 2050 put spreads for $49.30. The trade is not a bearish one. In fact, it makes its best profits if the NDX rallies to 2,050, or 39 percent, by the December expiration (it might be to hedge a short position in NDX futures).” Shortly thereafter an NDX December 625 - 675 call spread was sold 15000X for $49.25. So, the trade might not necessarily be bullish or bearish, but (if both spreads sold-to-open) a bet that the index will make a substantial move higher or lower before the December expiration. Outside of that, the CBOE Volatility Index (.VIX), the S&P 500 Index (.SPX), and the Russell 2000 Small Cap Index (.RUT). Trading was active due to end-of-quarter position adjustments, with 574,000 index puts and 372,000 index calls traded across all index products.

ETF Trading

Interest is picking up in the Direxion Daily Emerging Markets Bear Fund (EDZ). The fund is designed to move inverse (300 percent) of the MSCI Emerging Markets Index and finished the day up 22 cents to $13.83. In the options market, volume rose to 3X the typical levels, with 1870 calls and 980 puts. The increased activity is sign that some investors are looking for high volatility assets in an otherwise quiet period for the financial markets. Outside of that, the Powershares QQQ (QQQQ), the Spyders (SPY), and the iShares Small Cap Fund (IWM) had the most actively traded options contracts. Volume was light, with 1.5 million calls and 2 million puts traded across all index products.

Subscribe by RSS Subscribe by Email