Wednesday Options Recap

Sentiment

Stocks are trading broadly lower on weak economic data and falling commodity prices late Wednesday. The table was set for early weakness after data released from ADP before the opening bell showed the economy losing 532K private sector jobs in May. Economists were looking for a loss of 525K. April numbers were revised down to -545K, from the initial -491K.

Then, thirty minutes into the trading session, a report on Factory Orders and the ISM Services Index also fell short of economist estimates. Factory Orders rose .7 percent in April, which follows a 1.9 percent drop in March and compares to expectations of +.9 percent. Meanwhile, the ISM Services Index, a gauge of economic activity outside of the manufacturing sector, rose to 44 from 43.7. Economists were looking for an increase to 45.

While the Dow slipped to session lows on the heels of the data, crude oil came under pressure on bearish weekly inventory data. Crude is down $2.40 to $66.15 a barrel. Gold sank more than $20 and falling commodities is weighing on shares of energy, agricultural, mining, and metals companies.

In the end, investors found few reasons to bid stock prices higher ahead of productivity and weekly jobless claims Thursday followed by key monthly jobs data Friday. The Dow Jones Industrial Average is down 110 points heading into the final forty-five minutes of trading. The CBOE Volatility Index (.VIX) gained 1.87 to 41.80. Approximately 5.9 million calls and 5.4 million puts have traded across the options exchanges.

Bullish Flow

A number of individual biotech names Wednesday: Human Genome Sciences (HGSI) is up 42 cents to $3.05 and 6,500 calls traded, compared to 170 puts. HGSI Jun and Jul 5 calls being bought. Celgene (CELG) is up 97 cents to $45.25 and 17K calls traded, compared to 7,150 puts. Jun 50 and Jul 45 calls leading the flow. OSI Pharmaceuticals (OSIP) is up 74 cents to $31.84 and 7777 Oct 35 calls traded.

Walgreens (WAG) is down 48 cents to $31.14 and options volume is running 2X the usual. Most of the activity is due to one spread trade, where a strategist bought 4,500 Oct 32.5 - 36 call spreads and sold 4,500 Oct 27.5 puts. All legs of the trade hit on PHLX. Looks like they paid $1.25 for the call spread and collected $1.075 for the puts. No news on the stock today. Co. reported monthly sales (+1%) yesterday. Implied volatility is up modestly, to 34 from about 33 yesterday.

Bearish Flow

More than 23K iShares Emerging Markets (EEM) June 32 puts traded today. Shares are down $1.52 to $32.62 and some investors are buying the puts as part of bearish spreads. For example, one strategist bought the Jun 29 - 32 put spread 7000X for 71 cents. Another bought the June 30 - 32 spread 8200X for 57 cents.

GE (GE) is down 25 cents to $13.55 and July 13 puts are seeing some interest. 21.7K traded early and 87 percent hitting ask-side. While existing open interest is 34K, ISEE sentiment data indicate that a significant percentage (77 percent, or 8,900 contracts on ISE) of today's volume are opening customer put buyers. No news on GE today. Earnings due out July 17. Implied volatility is up to 52, from about 47 late Tuesday.

Implied Volatility Movers

Implied volatility is elevated in E*Trade (ETFC) ahead of a presentation at a Sandler O'Neill conference Thursday. Shares are down a nickel to $1.41 and July 1 puts are active after an investor bought 20000 contracts for 15 cents. Meanwhile, implied volatility is up to 160, up from 154 the day before.

Implied volatility is also higher in Valero (VLO), Mosaic (MOS), and Texas Instruments (TXN). Meanwhile, implied volatility is lower in TiVo (TIVO), BofA (BAC), and Wal-Mart (WMT).

Comments

[Rollerball:]

Thank you

Jun 03 05:15 PM