Thursday's Options Recap

Sentiment

Stocks moved higher early Thursday and the Dow Jones Industrial Average extended a 169-point gain from the day before. The stage was set for early gains after markets across Asia and Europe moved broadly higher. The early economic news painted a mixed picture, with data on weekly jobless claims showing some improvement, but separate numbers showed bigger-than-expected declines in March personal spending and incomes.

Investors seemed to look beyond the lackluster economic news and focus on the equity market's recent resilience instead. Stocks are holding modest gains this week despite increasing concerns over the swine flu outbreak, the ongoing banking industry "stress tests", and deep problems facing the automakers, which now include the bankruptcy of one of Detroit's Big Three.

Instead, it seems that investors have been increasingly willing to "compartmentalize" the equity market and focus on specific names and sectors rather than buy or sell across the board. The result is mixed trading and a lot of sideways market action. Thursday is another example, as The Dow Jones Industrial Average has given up early gains and is down 17 points. The NASDAQ is a few points higher.

Options volume is slipping as the market churns sideways. Approximately 5.4 million puts and 6.4 million calls traded heading into the final 45 minutes. The CBOE Volatility Index (.VIX) hit a low of 34.5, but has since moved back to 36.34 (+.26) ahead of a busy news day Friday (ISM, factory orders, consumer sentiment, earnings, and auto and truck sales).

Bullish Flow

Visa (V) and Mastercard (MA) options are busy Thursday. Visa is up $1.88 to $65.39 and options volume is running 3X the usual after the co. reported quarterly earnings of 73 cents per share on $1.65 bln in revenues. Analysts were expecting 64 cents on $1.61 bln. Mastercard, which reports earnings tomorrow (before market), is up $3.79 to $182 and hit 7-month highs today. Options volume is running 2X the usual, with May calls with strike prices from 180 to 220 seeing active trading.

Chiquita Brands (CQB) is up 21 cents to $7.75 and calls are active ahead of earnings due out after the closing bell. 2350 calls traded, or about 7X (680 percent) the expected for midday. Investors are showing interest in May 7.5 and 10 calls ahead of the news. With about 90 percent hitting ask-side, it looks like call buyers are dominating the action ahead of the earnings news.

Bearish Flow

Potash (POT) is up $1.17 to $86.76 and January 2010 puts at the $55 strike are seeing increasing interest. More than 12.7K traded, compared to open interest of 1,364. Today's activity includes several large blocks hitting at the offer for between $4.30 and $4.50 on the PHLX. Looks like premium buyers opening new positions–some possibly tied to shares. The Ag/Chem ETF (MOO) moved to 6-month highs earlier and is testing the upper end of its recent range.

The Powershares WilderHill Clean Energy Fund (PBW) holds shares in 51 companies that focus on greener and renewable energy sources. PBW includes some of today's hot solar names, including First Solar (FSLR), Evergreen Solar (ESLR), and JA Solar (JASO), and is up 34 cents to $9.08. In the options, volume is running 11X the usual, with June 10 puts leading the flow. The top trade is 716 contracts for $1.30 on the ISE, which is an opening customer buy according to sentiment data. 100 percent of the 2000 contracts traded hit ask-side.

Implied Volatility Movers

Hartford (HIG) shares are up and implied volatility is higher ahead of earnings due out after the closing bell. Shares are up $1.00 to $11.89 and total options volume is running about 4X the expected for midday trading. 43,000 puts and 10,000 calls traded. Implied volatility has rallied to 132, from about 120 the day before.

Implied volatility is also higher in Sequenom (SQNM), Energy Conversion (ENER), and TD Ameritrade (TD). Meanwhile, implied volatility is lower in International Paper (IP), General Motors (GM), and BofA (BAC).

Comments

[HipHoption:]

TD is actually the ticker for The Toronto-Dominion Bank. TD Ameritrade's ticker is AMTD.

Apr 30 09:22 PM

[rayman:]

I'm long a JUL MA Butterfly call spread @200 strike.....we shall see....
Longed V LEAPs before earns day before earns

May 01 02:55 AM