Sentiment

Stock market averages are up sharply and led by the financials Friday. JPMorgan (NYSE:JPM) jumped 5.9 percent and is the best gainer in the Dow Jones Industrial Average after the bank reported a solid quarterly profit on better-than-expected revenues despite the “London Whale” trading debacle. Wells Fargo (NYSE:WFC) is also rallying on earnings news. Meanwhile, stocks were broadly higher across Europe, led by a 1.9 percent rally in Germany’s DAX. Worldwide equity markets were steady after data showed China’s economy growing at a 7.6 percent pace in the most recent quarter. The number was better than expected, but not strong enough to take further monetary easing off the table.

In the commodities market, crude oil prices ticked up $1.14 to $87.22, and gold gained $26 to $1591 an ounce. On Wall Street, the Dow Jones Industrial Average is up nearly 200 points and not far from session highs. The NASDAQ gained 44 points. CBOE Volatility Index (.VIX) is off 1.30 to 17.03. Trading in the options market was busy this morning, but has slowed heading into the summer weekend. 6.1 million calls and 5.5 million puts traded across the exchanges so far.

Bullish Flow

Bank of America (NYSE:BAC) is up 26 cents to $7.74 and the second best gainer among 29 Dow stocks trading higher (only HPQ is in the red) late Friday. Trading is active and approaching 120 million BAC shares after both JPMorgan and Wells Fargo rallied around earnings news Friday. BofA reports on the morning of July 18. Trading in the options on the bank is active and reflects the bullish underlying tone ahead of the news. 198,000 calls and 50,000 puts traded on the bank so far. July 8 calls, which are 3.5 percent OTM and expiring just a few days after BofA reports earnings, are the most actives. 57,000 traded. January 10 and August 8 calls are the next most actives. The top trade is in the Jan 2014s, however, as a 15,000-lot of Jan14 $10 calls traded on BAC on the 92-cent bid and is possibly part of an over-write on the bank. Meanwhile, implied vols in the options on the stock eased 3.5 percent to 44, as investors breathe a bit easier following the rally in the financials today.

Bearish Flow

Vivus Pharmaceuticals (NASDAQ:VVUS) is off 35 cents to $27.38 and a Jul 15 – 33 risk reversal trades on the biotech at even money, 2500X. Looks like puts were sold to buy calls and, if so, is possibly to hedge or “collar” a stock position ahead of the FDA’s July 17 date for the company’s Qnexa obesity drug. The downside $15 puts are 45.2 percent OTM while the upside $33 are 20.5 percent OTM. Yet the bearish combo traded at even money because the vol skew is so steep. A 25 delta July put on VVUS currently has implied volatility of more than 300, compared to about 175 for an equivalent 25 delta July call option on the biotech.

Implied volatility Mover

Bridgeport Education (NYSE:BPI) is a big implied volatility mover today after an accreditation body put pressure on the for-profit education firm to provide additional information about its Ashford University. The Higher Learning Commission (HLC) asked Bridgeport to submit a report after another agency denied accreditation. Ashford University is currently accredited by HLC and the news seems to have stoked concerns that the school might lose accreditation. BPI is off $3.44 to $9.53 and falling to 52-week lows on heavy turnover of 5 million shares, which is almost 10x the typical volume for midday. The stock has now lost $600 million market cap since the news broke Wednesday. Options volume is 10x the daily average today, with 6,900 puts and 5,500 calls traded on the ticker so far. Some investors are bracing for additional volatility, and 30-day ATM vols in BPI surged 83 percent to new highs of 128.5.

Unusual Volume Movers

Bullish flow detected in Denbury Resources Inc. (NYSE:DNR), with 7493 calls trading, or 7x the recent average daily call volume in the name. Shares near $14.095 (0.355), with ATMIV lifting by 1.09 point and 80% of today's call premium trading offer side.

Bullish flow detected in Eaton (NYSE:ETN), with 14938 calls trading, or 5x the recent average daily call volume in the name. Shares near $38.08 (0.97), with ATMIV lifting by 1.24 point and 56% of today's call premium trading offer side.

Bullish flow detected in Pep Boys Manny Moe and Jack (NYSE:PBY), with 2026 calls trading, or 6x the recent average daily call volume in the name. Shares near $9.9 (0.14), with ATMIV lifting by 1.08 point and 80% of today's call premium trading offer side.

High options volume is being seen in Procter & Gamble (NYSE:PG), Wells Fargo, and iShares Long-term Bond Fund (NYSEARCA:TLT).