Monday's Options Recap

Sentiment

Stocks are broadly higher late Monday, with financials and commodity-related names pacing the advance. Bank stocks were higher early Monday after investment guru Warren Buffett said two of the nation's biggest banks (Wells Fargo (WFC) and USB) had the financial strength to weather the economic storm. The words held a lot of sway because, 1) they spewed from the lips of the world's most respected bean counter and 2) the comments come just a few days before the release of the government's highly anticipated bank industry "stress tests."

The early advance gathered additional strength after the day's economic data proved much better-than-expected. A report on pending home sales showed a surprise increase of 3.2 percent in March. Economists had expected no change. Meanwhile, a report on construction spending showed a .3 percent bump higher in March. Economists had expected a decline of 1.6 percent.

Meanwhile, strength in metals and crude oil prices is helping to lift a number of commodity-related names. Crude oil rallied back to recapture the $54 level and gold moved back above $900 an ounce. Heading into the final 45 minutes of trading, the S&P 500 Index is up 24 points and sits just above 900. Volume in the options market is picking up from the slow pace seen Friday, with 7.4 million calls and 5.5 million puts traded so far.

Bullish Flow

Coal stocks continue to run higher Monday afternoon. The Market Vectors Coal Fund (KOL) is up $2.24 to $21.25 and recently moved to session highs of $21.40 per share–its best levels since mid-October. The race higher comes after Goldman Sachs upgraded the coal group to attractive. In addition to KOL, a number of individual names are seeing increasing options activity including Massey (MEE), Peabody (BTU), and Arch Coal (ACI).

Crocs (CROX) is up 82 cents to $3.11 and options volume is running 3X the average daily. 4,500 calls and only 200 puts traded so far. Sentiment is decidedly bullish, with investors buying May and June calls at the $3 and $4 strikes. The shoe-maker is expected to report earnings on May 7 and Wedbush analysts said today that CROX is likely to report earnings above consensus.

Bearish Flow

Saks (SKS) is up 26 cents to $5.28 and May 5 puts are active Monday. 4,300 traded, compared to open interest of 263. One of the top trades of the day is 976 contracts for 35 cents on the ISE, which is an opening customer buy, according to sentiment data. The interest in SKS puts comes ahead of a May 7 sales release and first quarter earnings on May 19 (after the expiration).

RF Micro Devices (RFMD) is up 14 cents to $2.35 and 11K puts traded on the Greensboro, NC integrated circuit maker. Trading is active in May 2.5 and August 2.5 puts, with more than 5600 traded in each. 93 percent of today's options volume, which has been in 720 and fewer contracts, has been on the CBOE and more than 75 percent has traded ask-side of the bid-ask spread, suggesting buyers are dominating the flow. No news today. Earnings were reported last week.

Implied Volatility Movers

The CBOE Volatility Index (.VIX) sits little changed despite gains in the broader market midday Monday. VIX is nearly flat at 35 and the resilience in the "fear gauge" comes ahead of significant "event" risk later this week including Fed Bernanke's testimony to Congress Tuesday, jobs numbers Wednesday through Friday, and bank stress test results Thursday.

Implied volatility is also higher in Inverness Medical Innovations (IMA), General Motors (GM), and the PowerShares QQQ (QQQQ). Meanwhile, implied volatility is lower in BofA (BAC), Sprint Nextel (S), and Hartford (HIG).