Wednesday's Options Recap

Sentiment

Stocks are rallying, with strength in the financials and soothing words from the Federal Reserve helping to boost the Dow Jones Industrial Average late Wednesday. Disney (DIS) is the best percentage gainer in the Dow after a report on Gross Domestic Product released Wednesday morning showed a sharp of 6.1 percent in the first quarter, but encouraging signs of increasing consumer spending. DIS is up 8.8 percent to $21.22 a share.

Citi (C) and BofA (BAC) are holding gains despite reports yesterday that the two banks might need to raise additional capital. BofA (BAC) is up 5 percent, as the bank's shareholders meet today to vote on CEO Ken Lewis' fate on the company's board of directors. Citi seized 6.9 percent to $3.09 per share.

While bank stocks rose early, the rally was extended late in the day after the latest Federal Reserve Open Market Committee [FOMC] post-meeting statement held no major surprises. The Fed basically rehashed the same concerns about the economy, but also noted that the recession might be easing.

Twenty-eight Dow stocks are higher, only two are lower, and the industrial average is about 190 points, or about 40 points from session highs heading into the final 45 minutes of trading. The CBOE Volatility Index (.VIX) is down 2.09 to 35.86 and roughly 6.8 million calls along with 5.4 million puts traded so far.

Bullish Flow

Select Sector Financials (XLF) is up 44 cents to $10.87 and taking a stab at session highs ($10.90) after the latest FOMC post-meeting statement noted that the economic outlook has improved somewhat, partly due to easing of financial market conditions. XLF May 11 call option is today's most actively traded options contract, with more than 92K traded.

CR Bard (BCR) is up 60 cents to $71.61 and options volume is running 5X the usual. 3000 calls and 440 puts traded so far. The heightened activity appears to be related to unsubstantiated takeover talk making the rounds Wednesday–Briefing. May 75 calls are the most actives, with 1300 traded.

Bearish Flow

Las Vegas Sands (LVS) is up 71 cents to $7.69 and May puts at the $6 strike are seeing very heavy trading. 92,000 contracts traded, compared to open interest of 4,799. One investor bought 40000 contracts for 42 cents against a position of shares at $7.90 (19 delta). Another 4500 traded broker-to-broker for 35 cents. Implied volatility is coming up from two-month lows of 141 percent set late last week and is up to 146, from about 144 the day before. Some investors might be taking positions in anticipation of heightened volatility in LVS ahead of earnings. Some sources have April 29 as a release date, but that has not been confirmed and there is nothing yet posted on the company's web site.

SPDR Consumer Discretionary fund (XLY) is up 57 cents to $23.06 and has come off session highs after the Federal Reserve Open Market Committee meeting concludes and the minutes don't seem to hold any real surprises (economy still contracting, keeping funds rate at a 0 to 1/4-point range). One strategist stepped in shortly after the text was released and bought 45K XLY May 20 puts for 20 cents.

Implied Volatility Movers

E*Trade (ETFC) implied volatility is moving higher after the online broker reported earnings that fell short of analyst estimates and also warned that it would need to raise more capital. ETFC is down 79 cents, or 32.1 percent, to $1.67 and implied volatility is up to 170, from about 164 the day before.

Implied volatility is also higher in International Paper (IP), Boyd Gaming (BYD), and Mirant (MIR). Meanwhile, implied volatility is falling in Dendreon (DNDN), Massey Energy (MEE), and BofA (BAC).