VIX Briefly Rallies to Seven-Week High

The VIX closed up $1.78, at $27.44, after rallying to $28.77, a level it had not seen since July 6.
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Stocks ended the session lower for the fourth consecutive trading day, due to a dismal existing home sales report that sparked more concern about the economic recovery. The Dow Jones Industrial Average ended down 133.96 points, or 1.32%, to close at 10,040, after briefly trading below 10,000. The Dow has not traded below 10,000 since July 7. The S&P 500 lost 15.49 points, or 1.45%, to close at 1051, and the Nasdaq was down 35.87 points, or 1.66%, to finish at 2123.

July Existing-Homes Sales fell 27.2% to an annual rate of 3.83 million units, their lowest pace in 15 years. The prior month was revised lower to show a 5.26 million-unit pace.

As a result of the report, the CBOE Volatility IndexI:VIX briefly rallied to a seven-week high. The VIX closed up $1.78, at $27.44, after rallying to $28.77, a level it had not seen since July 6. VIX call volume of 114,000 contracts compares to put volume of 109,000 contracts, with active September call and October put volume.

The SPDR S&P 500 ETF (SPY) - Get Report closed down $1.59, at 105.536. SPY calls traded 732,000 contracts, verses 1.5 million puts. August put option implied volatility is at 28, September is at 26, October is at 28 and November is at 29, suggesting larger price movement in outer months. The S&P 500 Index (SPX) August weekly puts were active on 11,000 contracts. Traders view S&P support at 1050.

The Financial Select Sector (XLF) - Get Report and SPDR Homebuilder (XHB) - Get Report options were active in trading today. XLF closed down $0.08, at $13.98. XLF call option volume of 43,000 contracts compares to put volume of 180,000 contracts. XLF September put option implied volatility is at 33 and December is at 36, which is above its 26-week average of 29, suggesting larger price movement. XHB closed down $0.32, at $13.75. XHB call option volume of 25,000 contracts compares to put volume of 26,000 contracts. September put option implied volatility is at 41 and December is at 44, which is above its 26-week average of 36, suggesting larger price movement.

Looking ahead to Wednesday, traders will be focused on Durable Goods Orders due out at 8:30 a.m. EDT and New Homes Sales at 10 a.m. EDT. Other reports expected include: MBA Purchase Applications at 7:30 a.m. EDT and the EIA Petroleum Status report at 10:30 a.m. EDT. Notable companies reporting tomorrow include: American Eagle (AEO) - Get Report, BHP Billiton (BHP) - Get Report, Canadian Imperial Bank of Commerce (CM) - Get Report, Guess? (GES) - Get Report, JDS Uniphase (JDSU) , TiVo (TIVO) - Get Report and Toll Brothers (TOL) - Get Report.

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