Friday's Options Recap

Sentiment

Stocks are trading mixed late Friday. An in-line jobs report inspired a bit of profit-taking early after a three-day 450-point rally in the Dow Jones Industrial Average. Before the opening bell, the Labor Department reported that the economy lost 633,000 jobs in March. The number was not far from economist estimates (630,000). Meanwhile, the unemployment rate rose to 8.5 percent from 8.1 percent, which was also in-line with expectations.

The Dow slipped, but the NASDAQ held steady with help from Research In Motion (RIMM), which is up 20.6 percent after reporting better than expected earnings and guiding estimates higher for the next quarter. Overall, trading has been relatively quiet and, with 45 minutes left to trade, the Dow is down 5 points and the NASDAQ is up 10.

The CBOE Volatility Index (.VIX) is off 1.56 to 40.48 and hit a low of 40.02, which seems to be the new "psych" level for the volatility index. Volume is on the light side, with 6.3 million puts and 5 million calls traded so far.

Bullish Flow

Dell Computer (DELL) is up 63 cents to $10.13 and 48,000 calls traded on the computer maker, compared to 18,000 puts. The top trade of the day is 10K Nov 8 puts traded for 98 cents on the CBOE, which was sold while same strategist bought 5700 Nov 12 calls and also bought 5700 Nov 11 calls. The second biggest trade is 7000 April 10 calls for 31 cents on the ISE, which appears to be an opening customer call buy. Overall, sentiment seems bullish towards Dell.

No news on DELL today. Earnings due out late May. Kaufman analysts note yesterday that their recent checks confirm a recent WSJ story that HPQ and DELL are in talks with Google (GOOG) about bringing Android smartphone operating system to PCs and notebooks, a move which could reduce impact of the "Microsoft Tax" associated with Windows license.

Teck Cominco (TCK) is up 37 cents to $6.97 and calls are actively traded Friiay. Shares of the Vancouver-based mining and exploration company moved higher after copper (May) gained 11 cents to $2 Friday. In the options, May 7.5 and 10 calls are the most actives, with 7,200 traded and about 85 percent trading ask-side of the bid-ask spread. Looks like buyers dominating the action, and driving up implied volatility to 122, from about 114 late Thursday.

Bearish Flow

Frontier Oil (FTO) is up 58 cents to $14.05 and puts are actively traded Friday. 4,600 contracts so far, or about 10X the number of calls. May 15 puts are the most actives, with 4000 traded and nearly all of the volume hitting ask-side of the bid-ask spread. Existing interest is 89, suggesting opening put buyers are driving the action in FTO. No news on the stock today. Soleil analysts downgraded the stock last week on narrow crude differentials and falling margins. Earnings expected sometime early May.

Large blocks of puts traded on the SPDR Retail Trust (XRT). With shares near unchanged at $24.39, 40,000 May 20 puts traded after a strategist apparently opened a substantial spread: selling the May 20 puts while buying 20,000 May 22 puts and 20,000 May 18 puts. The spread is called a "butterfly": with the 20s creating the body of the fly and the 18s and 22s making the wings. It has a bearish risk-graph, as the maximum profit occurs if XRT settles for $20 per share at expiration.

Implied Volatility Movers

Cubist Pharmaceuticals (CBST) implied volatility is higher. Shares are up $1.10 to $17.03 and total options volume is running 38X the normal levels after unsubstantiated takeover chatter made the rounds Friday. Implied volatility jumped to 92 from about 64 the day before.

Implied volatility is higher in MF Global (MF), Legg Mason (LM), and Monsanto (MON). Meanwhile, implied volatility is falling in Research In Motion (RIMM), WFC, and General Electric (GE).

Comments

[LKofScotland:]

so is volitility good or bad?

Apr 04 03:08 PM

[rayman:]

bought the rimm 55 APR straddle Fri......

Apr 05 08:15 AM