Additionally, many investors blame lead underwriter (MS) and as such,Morgan Stanley’s stock price has dropped this week to $13.24, down 43% year-to-date.

In the wake of its more than $2 billion in trading losses, J.P. Morgan Chase, down 1.44% today, is expected to change its risk policy committee in the coming days. Reportedly, the change was in the works before the company on disclosed losses tied to wagers on corporate-credit indexes placed by a unit called the Chief Investment Office, which included a trader who has been called the London whale for his market-moving bets.

Overall, the markets were mixed today and finished flat, only slightly negative. The DOW, Nasdaq, and S&P all finished negative but none were down more than a quarter of a percent. The price of crude oil finished up .15% and gold futures were up .94%

Thomas Doherty is an undergraduate student at Villanova University majoring in Finance and Economics. For comments and questions, email Thomas@KeeneOnTheMarket.com

Unprofitable:  I lose money on this trade if SPY closes above $134.25 June 1, 2012.  The most I can lose on this trade is the amount I paid can be worth $1 minus the price I sold it for, $.25 for a total of $.75.  

Reason I Like This Trade:  I think the SPY is in a “Sell the Rally” mode, so I want to get short on any rally.  I make money on this trade if the SPY goes down, flat, or up a little bit

UPDATE 5.29.2012  With time on my side, even with a nice rally today in the stock market, this Spread is only worth $.28.  I like selling premium in the weeklies.  I will leave this Spread on as I think every rally in the stock market is a sale.

UPDATE 5.30.2012  With the stock market selling off, this Spread is currently worth $.16, but I am still leaving it on for more potential profits.

UPDATE 5.31.2012  I took this spread off today for $.03, it was not worth risking $97 to make $.03  Another winner at KOTM

Read more about break by www.keeneonthemarket.com

In today’s economic report, data showed consumers are more upbeat than they have been since the most recent recession. The Reuters/University of Michigan’s sentiment index rose more than expected at the end of May from earlier this month. Crude oil prices increased above $91 a barrel, a gain of 0.4%, while gold rose 0.5% to $1,565.

Facebook (FB) continues to drop after its highly publicized IPO and has once again, lost almost 3% and is now trading at $31.85, well belows its initial-public-offering price of $38. VeriFone (PAY) has slumped after lowering their third quarter estimates amid acquisition and restructuring costs and is currently trading at $37.83.

VeriFone Systems Inc (PAY) posted a net income of $14.5 million in the second quarter of fiscal 2012 or $0.13 per diluted share compared with a net loss of $3.1 million or ($0.03) per share in the previous quarter and a net income of $25.2 million or $0.27 per share in the year-ago quarter. Excluding one-time charges but including stock-based compensation expense, net income came in at $0.54 per share, beating the Zacks Consensus Estimate by a penny.
VeriFone reported revenues of $472 million in the second quarter of fiscal 2012, up 61.4% year over year and up 12.5% sequentially.
Based in San Jose, California, VeriFone designs, markets and services a transaction automation system that facilitates electronic payments between consumers, merchants and financial institutions.

VeriFone expects to see strong demand in the third quarter as well. However, concern looms large over the potential impact of a declining euro and other currencies when converted into U.S. dollar. For the third fiscal quarter, VeriFone expects to report net revenues between $495 million and $500 million. Excluding stock-based compensation, net income per diluted share is projected between $0.68 and $0.70. For fiscal 2012 (including 10 months of Point revenues), VeriFone expects to report net revenues between $1.900 billion and $1.925 billion. Excluding stock-based compensation, net income per diluted share is projected between $2.60 and $2.66.

Contributer Thomas Doherty is a student at Villanova University majoring in Finance and Economics. All questions and comments can be sent to Thomas@KeeneOnTheMarket.com

For more information, Follow Andrew on twitter at https://twitter.com/#!/KeeneOnMarket or like us on facebook: https://www.facebook.com/KeeneOnTheMkt

Other factors is that FB trades 193 million shares in a day and the only stock that trades close to that is BAC which trades 250 million and BAC traded about 100,000 options yesterday. Another question about volatility, where will it be? All the social media stocks are ranged between 65-85, with LNKD being a very similar to FB and that has a volatility of 77.

Who will be the main market maker, the easy answer is Citadel.

What else is important to know, earnings is schedules for July 25th, after July expiration so volatility in August will always stay very high. The last couple of days FB has had a tight range in the stock and since implied volatility is based on historical volatility, the more it trades in a smaller intraday range, the lower the implied volatility should trade. Also, since there are so many funds and banks that own this stock, they will want to protect their position, and they will be doing this by buying out of the money Puts and Selling out of the money Calls, making the Skew even more expensive.

One last thing to ponder, there will be Dollar Strikes and right off the bat there will not be weekly options. Also, if there are more Puts being Bought and Calls being sold, then traders will Sell MORE stock to hedge their position forcing the stock to go lower and the hard-to-borrow to increase