Friday's Options Recap

Sentiment at 3pm

The dismal market action continued Friday. After rallying 150 points shortly after the opening bell, the Dow Jones Industrial Average slipped back into the red by midday. A slow drift lower continued throughout the afternoon.

General Motors (GM) is the biggest percentage loser in the industrial average. GM is down 21.45 percent to $1.46 after the Wall Street Journal reported that the automaker is giving greater consideration to the possibility of bankruptcy. GM hit a 75-year low of $1.27 earlier in the trading day.

On the economic front, data released early showed the US economy losing 651,000 jobs during the month of February, which was in-line with economist estimates. However, January numbers were revised lower to show a loss of 655,000 jobs, down from an initial reading of -598,000. The unemployment rate rose to 8.1 percent, its highest since 1983. Economists had predicted the rate of unemployed would increase from 7.5 percent to 7.9 percent.

In the end, the day's events didn't offer much fodder for the bulls and investors continued to unload shares Friday. For the week, the Dow Jones Industrial Average lost almost 600 points. The NASDAQ is down 30 points on the day and off 110 points on the week. With forty-five minutes left to trade, the CBOE Volatility Index (.VIX) has added 1.62 to 51.79. Approximately 6.2 million puts and 6.4 million calls traded so far.

Bullish Flow

National Semi (NSM) calls are seeing some interest ahead of next week's earnings release (March 11, before market). Share are down 8 cents to $10.78 and 5,800 calls have traded, or about 4X (445 percent) the expected for this time of day. Mar and Aug 12.5 calls are the most actives, with about 5,200 traded and 85 percent trading ask-side of the bid-ask spread. Looks like buyers are dominating the flow, perhaps expecting good news when the chipmaker posts results.

A block of 20,000 Goodyear Tire (GT) Jan 7.5 calls traded on the ISE for 50 cents per contract earlier today. Shares are down 18 cents to $3.38 and ISEE Sentiment data suggests the trade was an opening customer buy.

Icici Bank (IBN) is down 3 cents to $10.13 and the April 12.5/15 call trades 1400X for 60 cents on the NYSE this morning. Looks like an opening buyer using a cheap spread to bet on a rebound in the bank.

Bearish Flow

iShares MSCI South Korea Fund (EWY) is up 20 cent to $21.60 and options activity is running at 5X the normal levels. Most of the activity is in the July 21/16 put spread after a strategist apparently opened a bearish 1×2 ratio spread, 4500X, paid 62.5 cents on the CBOE. It has now traded 5625X. (Hint: don't like the additional margin on ratio spreads? Try buying another put with a lower strike and create a butterfly instead.)

Cemex (CX) out-of-the-money puts are seeing volume for a second day. Open interest in the Jan-10 2.5 puts increased by 29.4K contracts following active trading Thursday. Today, the action continues with volume seen in April, July, October, Jan-10, and Jan-11 puts at the $2.5 strike. Shares are down 20 cents to $4.36.

Implied Volatility Movers

PNC Financial (PNC) is down $2.6 to $17.4 and has fallen 41.5 percent since last Thursday. Implied volatility is back up to 165 (+8) and not far from record highs (170) set on Jan 20. 11,000 PNC Mar 15 puts and 10,200 April 10 puts traded so far today.

Implied volatility is also higher in GM (GM), Legg Mason (LM), and Best Buy (BBY). Implied volatility is easing in General Electric (GE), United Healthcare (UNH), and Lennar (LEN).