Friday's Options Recap

Sentiment

Stocks are drifting lower and the overall tone of trading seems to reflect a certain sense of investor disinterest heading into the holiday weekend. With 90 minutes left to trade, the Dow Jones Industrial Average is down 33 points and sits at the 7,900 level. Trading is light as many players hit the exits early to enjoy a three-day President's Day weekend. In addition, investors don't have a lot of news to work with Friday. The University of Michigan Consumer Sentiment Index for early February was the only economic stat and showed a drop to 56.2 from 61.2, which was significantly below economist forecasts of 60.2. The earnings calendar is light and investors seemed unimpressed by news the House of Representatives approved the $787 billion stimulus package backed by President Obama. A $4 spike in crude oil, back towards $48 a barrel, is getting some attention, but a lot of the focus seems to be shifting to the weekend. Trading is light, with approximately 3.7 million calls and 3.9 million puts traded so far. The CBOE Volatility Index (.VIX) sits unchanged at 41.25.

Bullish Flow

Massey (MEE) and some of the coal stocks are heating up. MEE is up $1.58 to $16 and ran to session highs after AP reported that a federal appeals court overturned mountain-top mine rules, which is seen as a victory for MEE and other coal miners. Seeing strength in PCX, FCL, BTU, ACI along with increasing options activity in MEE, ACI, BTU.

YRC Worldwide (YRCW) is up 26 cents to $4 and 4,200 calls traded today, or about 4X (418 percent) the typical levels. Top trade of the day is 1,000 June 5 calls tied to a position in YRCW shares and appears to be a buy-write. Mar 5 calls are the most actives, with 2,530 traded and a little over half hitting ask-side. Overall, sentiment towards the Kansas-based trucking company seems bullish and follows news the company has amended financing agreements.

Bearish Flow

Put volume is picking up in Kohl's (KSS) the day after Goldman Sachs cut the stock to Sell from Neutral. The stock is down 17 cents to $36.27 today and 23K puts traded, or about 11X (1138 percent) the expected for midday action. April 40 and 35 puts are among the most actives, with about 90 percent of the 9,200 contracts hitting ask-side. Feb 35 and Mar 35 puts also active.

Patterson-UTI Energy (PTEN), a Houston-based oil and gas drilling company, fell 6.25 percent yesterday even after the company reported better-than-expected earnings. Today, shares are up 45 cents to $9.75 and 5,300 Mar 10 puts traded. Top trade is 1,900 contracts on the bid for $1.10. Most of the other activity has been ask-side. It's possibly closing as existing open interest is 6,484.

Implied Volatility Movers

Rackable (RACK) implied volatility is lower. In a sign that a lot of bad news has been priced into the stock after an eight-month 73 percent drop in the share price, RACK is up 36 cents, or 9.3 percent, even after reporting fourth quarter earnings that missed analyst estimates and also guiding estimates lower for the first quarter. Implied volatility is down to 88, from about 111 the day before.

Implied volatility is also lower in Savient Pharmaceuticals (SVNT), General Motors (GM), and Pepsico (PEP). Meanwhile, implied volatility remains elevated in Alcoa (AA), Geron (GERN), and Synta Pharmaceuticals (SNTA).

Comments

[PeteK:]

"implied volatility" could mean bias from those so called analysts.
Should never be used.
GM is in such a mess right now, why waste time even talking to the
UAW ? Just go chapter 11 and start anew.

Feb 15 03:29 AM