Tuesday Options Recap

by: Frederic Ruffy


Stocks opened steady on news Federal Reserve Chairman Ben Bernanke was reappointed to a second term and the early advance gathered additional momentum on upbeat consumer confidence data. While the reappointment of Bernanke wasn't a huge surprise, it does remove some uncertainty about future US monetary policy moving forward.

Meanwhile, the day's economic data was again benign. A report from Case Shiller released an hour before the opening bell on Wall Street showed home prices falling 15.44 percent in June, which was better than the -17.02 percent in May and also better than 16.4 percent economist forecast. An hour later, the Conference Board reported that its index of consumer confidence rose to 54.1 in August, up from 46.6 in July and better than the 47.9 economists forecast.

The Dow Jones Industrial Average rose to session highs shortly after the confidence numbers hit the wires, but has since backed off in rather quiet market action. With an hour left to trade, the industrial average is up 56 points and down 55 from its best levels of the day. The CBOE Volatility Index (VIX) is down .31 to 245.73. Trading in the options market is on the light side, with 4.8 million puts and 5.7 million calls traded so far (a ratio of .84, compared to a 22-day average of .79.)

Bullish Flow

Dendreon (NASDAQ:DNDN) is up 81 cents to $24.06 and 16K calls traded, compared to 1,960 puts. The activity is primarily in Sep calls with strike prices ranging from 24 to 35 and, with more than half hitting ask-side, seems that some investors are buying premium in anticipation of short-term strength in shares of the Seattle-based biotech company.

ActivisionBlizzard (NASDAQ:ATVI) is down 14 cents to $12.03 and 6,596 Oct 12 calls traded–97 percent hitting ask-side and existing open interest of 1,142. ISEE data indicate 69 percent (2870 contracts) of ATVI calls traded on ISE today are opening customer buyers.

Bearish Flow

Ciena (NASDAQ:CIEN) is down a dime to $13.07 and 6,500 puts traded, or about 14X the expected for the first 2 hours of trading. Traders are focused on Sep 12.5 and 15 puts, with 2,134 contracts and 4,343 contracts traded, respectively. In addition, with 75 percent hitting ask-side (ISEE at 66 percent), it appears that put buyers are taking positions ahead of the company's Sep 3 (before market) earnings release. Implied volatility (average) is moving as well, up to 73, from about 68.5 late Monday.

Implied Volatility Movers

Matrixx Initiatives (MTXX) shares saw a spike in midday trading on talk of possible pending FDA news. MTXX gained 22 percent and implied volatility reflected in MTXX options premiums surged to 143 percent, from about 111 late Monday.

Implied volatility is also higher in Human Genome Sciences (HGSI), Dendreon (DNDN), and Ciena (CIEN). Meanwhile, implied volatility is easing in Fannie (FNM), Freddie (FRE), and Ivanhoe Mines (IVN).