Friday’s total option volume of 21.3 million contracts resulted in net open interest growth of 3.43 million calls and 3.61 million puts. Intel Corporation (INTC), Bank of America Corporation (BAC), Apple Inc (AAPL) and Facebook Inc (FB) saw the greatest growth. Top five new positions opened include 38k Intel Corporation (INTC) Jan-14 18 puts, 28k TJX Companies Inc (TJX) Mar-13 45 calls, 27k Chimera Investment Corporation (CIM) Mar-13 3 puts, 25k Sprint Nextel Corporation (S) Apr-13 6 calls and 22k Microsoft Corp (MSFT) Jul-13 28 calls.
Merger and acquisition activity, IPOs, dividend yields, earnings, fund flows into equity mutual funds, central bank easy money policies, corporate buybacks, etc. are helping to drive equity prices higher. Our market sentiment indicator is bullish and holding steady over the past four weeks. However, history suggests that the week following option expiration is often when bull market pullbacks occur. The catalyst might be rising anxiety associated with the mandatory federal budget cuts dictated by the Budget Control Act of 2011 on March 1. We have been looking for a meaningful pullback to add long exposure. If such a pullback occurs later this week, expect to see us add several new positions on weakness.