Friday Options Recap

Sentiment

Stocks are sporting modest gains in a day of relatively quiet trading on "quadruple witch" options expiration Friday. The day was off to a relatively slow start as the economic calender held no new numbers and the earnings news was light as well.

The tech-heavy NASDAQ slipped in morning trading after Palm (PALM) reported a quarterly loss of 10 cents per share, which was better than the 25-cent analyst estimate, but then also lowered its 2nd quarter revenue outlook. PALM is down 59 cents to $13.85.

The early weakness was short-lived, however, and the major averages have moved back to positive territory late Friday. With 90 minutes left to trade, the Dow Jones Industrial Average is up 45 points and the NASDAQ has added 8. The CBOE Volatility Index (.VIX) edged up .09 to 23.74. Trading on the options exchanges is active due to the expiration. Approximately 6.3 million puts and 7.0 million calls had traded by 2:30 Eastern Time (a ratio of .90, compared to a 22-week average of .76.)

Bullish Flow

Eastman Kodak (EK) is down 24 cents to $5.69 and has been under pressure since Thursday morning when EK said it expects to raise $700 mln through financing transactions and also lowered 2009 earnings guidance. Options are busy for a 2nd day, with total volume running 5X the average daily. Like Thursday, April 6 calls are leading the order flow. 33.8K traded — 81 percent hitting ask-side. A lot of the activity has been on the ISE, where sentiment data indicate that customers have bought-to-open an impressive 17K EK calls today. IV = 99 (-10).

Tenaris (TS) is up 59 cents to $36.63 and optios volume is running 4X the average daily on increasing interest in Oct 40 calls. 2,250 traded vs. ope interest of 178. Looks like buyers, possibly non-customer, as ISEE data indicate that only 1 percent, or 20 TS calls, were opening customer buyers. Implied volatility is eding up to 35, from 32.5 late Thursday.

Bearish Flow

Nexen (NXY), a Calgary based oil and gas company, is down 11 cents to $23.90 and options volume is running 7X the average daily on increasing interest in Oct 22.5 puts. 5630 traded and 95 percent trading ask-side. While this looks like opening buyers, some of the action is tied to shares. 2500 were bought this morning against shares at $23.45 on 35 delta.

Implied Volatility Movers

Star Scientific (STSI) calls are active and implied volatility is racing higher. Briefing is reporting chatter that a jugde ruled to retry RAI/STSI case. Sep 1 calls are leading the flow, with 4,000 traded and 59 percent hitting ask-side. Another 1,400 Oct 1 calls traded. Meanwhile, implied volatility is rallying to 150, from about 123 late yesterday and 92 one week ago.

Implied volatility is also higher Tenaris (TS), eTrade (ETFC), and is easing in PALM, Arena Pharmaceuticals (ARNA), and Sequenom (SQNM).