Market Quiet On Day Before Thanksgiving Holiday

Market was rather quiet today and volume was anemic, as generally expected on the trading session before Thanksgiving. Friday is “Black Friday” - the traditional beginning of the holiday shopping season. Stores usually have the most foot traffic on Black Friday, but more often than not the cash registers are generally busiest on the Saturday before Christmas. This Friday is a shortened stock market trading session and I will be spending the day with my family and friends, so there will be no newsletter. I would like to say “thank you” to our readers for being optionsXpress customers. The entire optionsXpress family wishes our customers a Happy Thanksgiving! Gobble, Gobble! See you Cyber Monday.

Stocks are holding modest gains on better-than-expected economic data Wednesday. Reports released before the start of trading in New York showed October personal incomes/spending rising more than economists had predicted, and weekly jobless claims falling more than expected during the week ended November 21. Separate data, released at 8:55 central time, showed the University of Michigan consumer sentiment index increasing to 67.4 in November, up from 66 earlier this month and better than the 67 economists had predicted. New homes sales surprised to the upside as well. The latest numbers showed improvement to annual rate of 430K in October, up from 405K in September and better than the 401K economists had expected. With only a handful of earnings reports to guide the action, and slow trading ahead of the holiday, the Dow Jones Industrial Average moved modestly higher on the data and has been drifting sideways throughout most of the session. With about an hour left to trade, the Dow Jones Industrial Average has traded in a 60-point range and is up 30 points.

Bullish
A large spread traded in XTO Energy (NYSE:XTO) Wednesday. Shares are up 77 cents to $42.96 and a strategist sold 21,000 December 47 calls to buy 10,000 February 44 calls. The spread likely closes out a substantial position in the December 47s (where open interest equals more than 23,000) and opens a new position in the February 44 calls.

Bullish activity also picked up in Sun Micro (NASDAQ:JAVA), Citrix Systems (NASDAQ:CTXS), and Research In Motion (NASDAQ:RIMM).

Bearish
There was not a lot of bearish activity to report Wednesday, as the major averages moved broadly higher and volume slowed ahead of the holiday. Landstar Systems (NASDAQ:LSTR), a Jacksonville, FL trucking company, saw more volume than usual. Shares are up 19 cents to $37.72 and 1,320 puts traded. The volume represents 14X the normal activity and compares to 374 calls. December 35 calls are the most actives. 1,200 traded and, with 92 percent hitting ask-side, it looks like premium buyers are taking positions ahead of a conference call next week.

Index Trading
Trading has slowed down considerably in the index market ahead of the Thanksgiving Day holiday break. About 294,000 calls and 257,000 calls traded across all the index products, which represents about 60 percent the typical volume. The biggest trades of the day hit early and involved a substantial call spread on the CBOE Volatility Index (.VIX). VIX is down .03 to 20.44 and one strategist bought 25,000 VIX December 27.5 calls while selling 50,000 December 32.5 calls. This (1X2) call ratio spread costs only 4 cents and requires a substantial move higher, towards 28 in the VIX, to generate a profit at the December options expiration.

ETF Trading
A large put spread traded in the iShares Brazil Fund (EWZ) late Wednesday. Shares gained $1.18 to $77.92 and one strategist appears to be looking for a pullback in the weeks ahead. They bought the December 70 - 67 (2X1) put ratio spread 10000X on PHLX. That is, they bought 10,000 December 70 puts while selling 20,000 December 67 puts, creating a bearish ratio spread with a max pay-off if EWZ falls to $67 by the December expiration.

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