Monday Options Recap

by: Frederic Ruffy


Stocks opened higher and then spent most of the remainder of the session moving sideways. With no economic data to guide the morning action, deal news was in focus early in the day. Xerox (NYSE:XRX) is buying Affiliated Computers Services (ACS), sending ACS up more than 20 percent. Abbott Labs (NYSE:ABT) said it is buying the pharmaceutical business of Belgium's Solvay and Johnson & Johnson (NYSE:JNJ) is buying 18 percent of Crucell (NASDAQ:CRXL).

Beyond that, the day's news left investors very little news to work with and me with very little to write about. Cisco (NASDAQ:CSCO) is the best gainer in the Dow and also helping the NASDAQ after Barclays analysts raised their rating on the stock to "overweight". The Dow Jones Industrial Average is up 130 points and the NASDAQ gained 41 heading into the final 30 minutes of trading. The CBOE Volatility Index (.VIX) is down .72 to 24.89 and options volume is very light, with approximately 4 million puts and 5.1 million calls traded so far (a ratio of .77, compared to a 22-day average of .79).

Bullish Flow

Genworth Financial (NYSE:GNW) is up 81 cents to $12.68 and options are active, as players jockey for position in anticipation of its next move. 27K puts and 17K calls traded. Recent trades include a sweep of 5000 Dec 15 calls at the offer for $1.10. More than 11.5K now traded. Meanwhile, 2,500 Jan10 $5 puts were bought in a sweep for 80 cent per contract. 10.7K now traded.

Green Mountain Coffee Roasters (NASDAQ:GMCR) rallied in morning trading Monday and hit a new 52-week high. Shares are up $4.19 to $73.12 and GMCR October calls are seeing heavy trading. October 80s are the most actives, with 1,925 traded and 84 percent hitting ask-side. With volume exceeding open interest, it looks like call buyers are looking for additional upside.

Bearish Flow

The S&P 500 Index (.SPX) opened higher and rallied in morning action. Since then, trading has been mostly sideways amid a lack of any market moving news. As noted earlier, volume in the options market is running about 70 percent the usual. However, some investors appear to be bracing for some potential volatility going forward, as the put-to-call ratios on both the SPX and the SPYders (SPX) are running above normal. In the cash index, 212,000 puts and 56,000 calls traded, a ratio of 3.8 (compared to 22-day avg of 1.55). In the SPYders, another 460K puts and 238K calls traded, a ratio of 1.93 (compared to 1.25 avg). The increase in put activity comes ahead of key data later this week, including jobs Friday.

Implied Volatility Movers

The CBOE Volatility Index (.VIX) is down .69 top 24.92 and moving lower as stocks rally in quiet trading Monday. However, volatility might pick up later this week as the quarter comes to an end Wednesday and the volatile month of October begins Thursday. In addition, the economic calendar is backend loaded this week and concludes with key jobs data Friday.

Implied volatility is also lower in Crucell (CRXL), CIT, and the NASDAQ Qs (QQQQ). Implied volatility is higher in Genworth (GNW), Green Mountain Coffee (GMCR), and Xerox (XRX).