Monday Options Recap

Sentiment

Stocks opened lower Monday morning as pre-earnings jitters and the potential bankruptcy of General Motors (GM) weighed on investor sentiment in early trading. Although no earnings were released Monday, this week's calendar holds a number of important releases, including reports from Goldman Sachs (GS), Johnson & Johnson (JNJ), and Intel (INTC) Tuesday. Investors will also digest this week's first round of economic data tomorrow morning when retail sales and inflation (PPI) data are released before the opening bell.

Meanwhile, General Motors (GM) is down 17 percent and the biggest loser in the Dow Jones Industrial Average after the Treasury Department told the automaker to provide groundwork for bankruptcy by June 1.

Yet, while GM is sinking and this week's economic and earnings calendars seem to hold significant "event risk," the Dow Jones Industrial Average has been able to battle back from its worst levels with help from the financials. Citi (C) gained 19.4 percent after announcing plans to unload its Nikko Citigroup unit in Japan.

Fourteen Dow stocks are higher, sixteen are lower and the Dow Jones Industrial Average is down 30 points heading into the final hour of trading. After closing at its lows of the year Thursday, the CBOE Volatility Index (.VIX) is up 1.40 to 37.93. Trading in the options market is active heading into this week's expiration, with approximately 8 million calls and 5.2 million puts traded so far.

Bullish Flow

Monster Worldwide (MWW) shares are up $1.49 to $12 after William Blair upgraded the stock to Outperform from Market Perform. The firm believes deterioration in the newspaper industry should help online recruiting companies. In the options market, MWW volume is running 6X the usual, with 7,800 calls and 1,200 puts traded. Looks like a mix of both buyers and sellers driving increased volume in April and May 12.5 calls.

Huntington Bancshares (HBAN), a Columbus, OH-based regional bank, is seeing relative strength and bullish options order flow Monday. Shares are up 59 cents to $2.75 and options volume is running 6X the usual. Most of the activity is in April, May, and July calls with the $2.5 strike. About 7500 traded and roughly 80 percent hitting ask-side of the bid-ask spread.

Bearish Flow

Teradyne (TER) slipped 16 cents to $5.17 and 2,140 puts trade so far today, or about 26X (2643 percent) the expected volume for midday. The activity is scattered across Oct and Jan-10 puts at the $5 and $7.5 strikes. Volume exceeds open interest in all four contracts and ISE Sentiment data confirm that customers are opening new put positions in the chip equipment maker. No news on the stock today. Earnings due out around Apr 22 (date unconfirmed).

The PHLX Bank Sector Index (.BKX) gained .85 to 34.66 and up almost 6 percent from morning lows, as shares of some of the major banks rebound from early losses Monday. The top options trade on the index seems to reflect some concerns about the short-term outlook for the banks, however, after an investor bought 10000 BKX June 27.5 puts for $2.05. Looks like a new position, as existing open interest is only 29 contracts.

Implied Volatility Movers

Goldman Sachs (GS) is up $3.94 to $128.27 after Citi initiated the stock with a buy and ahead of earnings due out Tuesday before the bell. Implied volatility is up to 69, from 3-month lows around 64 late Thursday. The IV skew between April (99 percent) and May (60 percent) hints at a possible earnings gap move of $11.25 per share, or 8.8 percent, when GS releases its results.

Implied volatility is also higher in Wells Fargo (WFC), WellPoint (WLP), and AmEx (AXP). Meanwhile, implied volatility is lower in General Motors (GM), Express Scripts (ESRX), and Talbot's (TLB).

Comments

[rayman:]

Hey Fred, did you see the prints on this guy buying the .SIN index? hmmmm......no interest here, but weird....maybe MGM news
lost on MGM calls last month, but still interesting to me i suppose for some reason
ok, maybe i need a preacher!
get it?
.SIN index of course...

Apr 13 05:07 PM