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U.S. stock market report 1555 ET 20Nov2009 Yahoo option volume swells, calls active

Several option plays in Internet giant Yahoo Inc helped send its option volume to four times the norm. About 99,000 calls and 34,000 puts traded, according to Trade Alert.

Its shares fell 1.22 percent to $15.42. Two different strategies were in play, wrote Interactive Brokers Group option analyst Caitlin Duffy in a note. A large volume sold strangle in the January 2011 contract suggests shares would remain stagnant through expiration, she said. The trade involved the sale of 20,000 puts at the Jan $12.50 strike for $1.10 each, and the sale of 20,000 calls at the Jan $17.50 strike for $1.65 apiece. The investor retains the gross premium of $2.75 per contract if shares stay within the confines of the two strikes described through expiration. A large credit spread was initiated in the same January contract. It appeared 24,000 calls were sold at the $20 strike spread against the purchase of the same number of calls at the $30 strike. The trader gets a net credit of 87 cents as long as shares stay beneath $20.

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1434 ET 20Nov2009
CBOE corrects VIX session low on CBOE volatility index

The Chicago board options exchange said on Friday it has corrected the VIX
session low on the CBOE Volatility Index to 22.26 from 19.77. VIX, Wall Street's favorite pulse of investor sentiment, is currently at 22.61 down 0.09 percent from the previous session. For details, see

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1209 EST 20Nov2009
Hess Corp up after Morgan Stanley upgrade

Shares in Hess Corp rose 2.3 percent to $58.89 after Morgan Stanley raised the stock to 'overweight' from 'equal weight' and bumped its price target to $75 from $65.

Morgan Stanley said it was upgrading its rating on value, the return of exploration catalysts in the second half of next year and catch-up of shares in oil sector companies left behind in 2009.

Hess was the only gainer in the CBOE oil index, a gauge of 11 big oil companies with U.S.-listed shares. The index fell 1.4 percent.

UBS upgraded Hess to 'buy' from 'neutral' on Tuesday.

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1219 ET Huge BofA call butterfly spread suggests bullish view

Bank of America shares rose 3 cents to $16.11 in afternoon trade. In the options patch, one investor appeared to have utilized a $20-$30-$40 butterfly call spread to position for more bullish movement in BofA shares by January 2011 expiration. The trader established the spread by buying 50,000 call options at each of the $20 and $40 strikes for $1.82 and 12 cents, respectively, for the wings. The body of the butterfly was sandwiched between the wings through the sale of 100,000 calls at the $30 strike for 37 cents, said Frederic Ruffy, options strategist at WhatsTrading.com. The net debit of the trade was $1.20 per fly. By selling the $30 strike, the investor is bracing for shares to move towards $30 during 2010, almost double the current stock value, Ruffy said. The break-even for the trade is $21.20 by January 2011 expiration.

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1209 EST 20Nov2009
BMO starts semi sector at 'market perform'

BMO Capital Markets on Friday started coverage on the U.S. semiconductor sector with a 'market perform' rating, citing the need for caution on the group because of a sharp bounce in fundamentals in 2009.

As part of its call, BMO started coverage on Intel Corp with an 'outperform' rating and Advanced Micro Devices at 'market perform.'

For details, see

On Thursday, Bank of America-Merrill Lynch cut its growth outlook on the semi group and downgraded several stocks, including Dow component Intel.

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12:00 ET 20Nov2009
Dell, D.R. Horton results pull Wall St lower

Worse-than-expected results from computer maker Dell and homebuilder D.R. Horton helped send stocks lower on Friday in the third straight negative session for Wall Street.

The Dow Jones industrial average dropped 44.21 points, or 0.43 percent, to 10,288.23. The Standard & Poor's 500 Index fell 6.35 points, or 0.58 percent, to 1,088.55. The Nasdaq Composite Index slid 17.79 points, or 0.82 percent, to 2,139.03. Reuters Messaging:rm://[e-mail]


1145 ET 20Nov2009 Goldman Sachs: Sell Jan
2011 Yahoo strangles

Selling January 2011 $15/$20 covered strangles in Internet giant Yahoo Inc are attractive to enhance yield, wrote Goldman Sachs derivative strategists in a note. By selling the strangle, recently at $3.07 with shares at $15.61, holders collect 20 percent upfront. 'We expect a fundamental decline in Yahoo volatility,' they said. The conclusion of the Microsoft agreement and appointment of a new chief executive creates stability in YHOO's strategy for the medium-term and structurally changes the outlook for volatility over the next year, Goldman said. Microsoft and Yahoo earlier this year signed a 10-year global web search partnership to challenge market leader Google Inc, a pact that U.S. and European antitrust regulators are evaluating. As investors become more comfortable that management is unlikely to make large near-term changes in strategy, Goldman expects Yahoo implied volatility to fall sharply, benefiting investors who have sold options.

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