What is Going on?

The market has seen the largest drop since '08 due to global economic concerns and has also seen it whip back so fast that many who sold cant get back in at the lows. This is why veterans will always say, "Trade your plan". As many sold due to the S & P downgrade and global economic concerns others were buying value names for a cheaper price. In order to trade effectively you have to stick to the plan regardless of emotions. Do we have economic concerns, yes, however news has always been a factor for the stock market. Can we even trust the downgrade from a public company that could have financial interests, like we saw in '08 when Lehman bonds were still rated Triple A but then dropped out of the sky a few days later. Possibly it was a political move as we are on the brink of 2012 elections. Who knows but one thing is for sure, stocks and options have had a wild ride the last few days and hopefully you traded your plan.

Options action picked up in Staples (SPLS) today. Shares of the office supplies retailer added 7 cents to $13.21. Total options volume was 5X the average daily, after 28,000 calls and 4,150 puts traded in Staples today. January 2013 calls at the $15 strike were the most actives. 15,100 traded and 100 percent of the volume traded at the Ask, which suggest buying. January 2013 $10 calls traded 8,146 contracts. The interest in longer-term calls on Staples comes after a three-month 40.8 percent slide in the share price. Some investors might believe that the sell-off has been overdone, but rather than buying shares they are locking in their right to buy the stock at $10 and $15 per share with longer-term 2013 call options. Staples is due to release its earnings on August 17.

Intel (INTC) gained 49 cents to $20.60 and options on the chipmaker were very heavily traded today. 139,000 calls and 141,000 puts traded in Intel Tuesday. The top trades were part of a straddle after an investor sold 34,000 September 20 puts at 80 cents and sold 34,000 September 20 calls at $1.10. In other words, they sold the Sep 20 straddle at $1.90, 34000X. The position looks opening because volume exceeds the existing open interest in both contracts. It's not necessarily a very bearish play, but a bet that shares of Intel will hold around $20 through the September expiration, which is in 38 days.

Bearish flow also surfaced in MGM, Saks (SKS), and Dana Corp (DAN).

-Courtesy of Optionsxpress.com

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