STOCKS NEWS US-Options risk gauge hits best levels since Dec 1

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U.S. stock market report 1720 EST 22Feb2010 VIX notches highest daily percentage gain since May

The CBOE Volatility Index, Wall Street's favorite barometer of investor anxiety known as the VIX, surged to 20.80, its highest level since Dec. 1 as U.S. stocks slumped on turmoil in oil exporter Libya. Cautious sentiment prevailed in the options market. The 30-day risk forecast of stock market volatility rose sharply as traders were inclined to bid up S&P 500 index options to manage their risk. At the end of the session, the VIX surged 26.60 percent, its highest daily percentage gain since May 20, 2010. The VIX is below the front month March VIX futures, which closed at 21.15. The April VIX futures are higher and settled at 21.60.

Even though there have been 'a couple of headfakes in this incredible equity rally, this one does feel like it won't be a one day wonder,' said optionMonster analyst Chris McKhann on the firm's website.

While the unrest in Libya might be a factor for the stock slump, McKhann said he was not as quick to apply causation in this instance. 'This market was ready for a pullback on a number of levels,' he said.'

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1710 EST 4Feb2010
Earnings and economic diary for Feb. 22

Companies scheduled to report quarterly results on Wednesday include Frontier Communications Corp, Nicor Inc, Lowe's Companies , Limited Brands and Priceline.com.

Economic indicators on tap include January existing home sales.

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1645 EST 22Feb2011
HP shares drop after sales outlook

Shares of Hewlett-Packard Co fell in extended trading on Tuesday after the Dow component trimmed its 2011 revenue projections on falling consumer demand for its personal computers.

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The stock dropped 8.5 percent to $44.15.

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1628 EST 22Feb2011 ETF options trading turns active

Options volume was respectable on Tuesday as U.S. stocks extended losses on concerns over escalating unrest in Libya, a large oil producer. The latest turmoil in the Mideast drove crude oil prices to 30-month highs.

Option traders exchanged about 11 million puts versus 11.6 million calls, according to Trade Alert. In the exchange-traded funds, for example, about 4.78 million puts and 3.14 million calls crossed the tape. Five of the top six most actively traded ETF options are puts on the SPDR S&P 500 ETF.

The March $16 put options on the Financial Select Sector SPDR ETF, which was the subject of a big bearish butterfly trade on Tuesday, were also active.

Options on the United States Oil Fund was 2.6 times the average daily turnover after 307,000 contracts traded. Volume was dominated by the call side of the chain as 221,000 USO calls traded following the spike in crude oil prices.

Option volume on the ProShares Ultra DJ UBS Crude Oil fund was 4.9 times the normal levels and turnover on the ProShares Ultra Short S&P 500 was 3.1 times the typical levels. Some of the sector funds, including Industrial Select Sector SPDR, the SPDR S&P Metals and Mining and the Consumer Discretionary Select Sector SPDR, have seen an an uptick in put volume, according to Trade Alert.


1618 EST 22Feb2011
Markets close sharply lower on Libyan turmoil

U.S. stocks ended sharply lower on Tuesday, with the S&P 500 losing 2.05
percent in its worst one-day percentage drop since August, as investors dumped stocks on turmoil in oil exporter Libya, in what could be the start of a long-anticipated pullback after a lengthy rally.

Rising volatility and heavy volume added heft to the possibility of a larger pullback.

The CBOE Volatility Index, Wall Street's fear gauge, rose 26.9 percent, which would be its biggest one-day jump since May 20, 2010.

Based on the latest available data, the Dow Jones industrial average was down 178.46 points, or 1.44 percent, to end unofficially at 12,212.79. The Standard & Poor's 500 Index was down 27.57 points, or 2.05 percent, to finish unofficially at 1,315.44. The Nasdaq Composite Index was down 77.53 points, or 2.74 percent, to close unofficially at 2,756.42.

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1536 EST 22Feb2011 Goodrich draws bullish option plays as stock dips

Airplane parts maker Goodrich Corp dropped 4.23 percent to $87.44 in late trade. In the options market, it appears traders are taking advantage of the dip in shares to buy bullish options on the stock. A noteworthy trade is a block of 3,982 March $90 calls traded at 75 cents when the market was 65 to 75 cents and it looks like an opening buyer, said WhatsTrading.com options strategist Frederic Ruffy. The strike's volume has expanded to 5,331 contracts against open interest of 150. Ruffy noted that another 1,190 May $85 calls also changed hands. The demand for call options on the stock helped pushed its option implied volatility up 25 percent to 25 percent. Some players might view Tuesday's weakness as an opportunity for bullish trades in the stock, Ruffy said.

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