Friday Options Recap

Sentiment

The major averages traded in a narrow range and are modestly higher late Friday. With no earnings of broad market significance and a light economic calendar, there wasn't much news to guide the early action.

The latest trade balance numbers, released pre-market, showed the deficit unexpectedly narrowing last month. It shrank to $30.7 billion in August from $31.9 billion the month before. Economists were expecting the deficit to widen to $33 billion. The first decline in May came as exports hit their highest level for the year and imports eased.

The dollar saw a modest move higher on the news and the gains in the buck put modest pressure on crude oil and gold prices early. However, crude oil has battled back and is up 21 cents to $71.90 late in the day. After big gains tallied earlier this week, gold is down $8 to $1048.30 an ounce.

Meanwhile, the Dow Jones Industrial Average traded in a narrow 70-point range and is up 40 points heading into the final 90 minutes of trading. The CBOE Volatility Index (.VIX) is down for a fifth day and is off .72 to 23.46. Trading in the options market is on the light side, with approximately 3.6 million puts and 4.7 million calls traded so far (a ratio of .77, compared to a 22-day average of .77).

Bullish Flow

85,000 RIM (RIMM) calls traded so far today. Shares are up 93 cents to $69.59 and Oct 70 and 75 calls are active after Silicon Alley Insider Henry Blodget appeared on Bloomberg saying, in order to compete in the mobile market, it's a no-brainer: Microsoft needs to buy Research In Motion -- link to story on web site.

The top options trade so far today is 86K Citi (C) Nov 5 calls, bought for 20 cents. It was tied to a block of 4.3 million (50 delta) Citi shares at $4.63.

Bearish Flow

Costco (COST) puts are seeing some interest Friday. Shares, which jumped mid-week after the retailer posted better than expected earnings, are down 60 cents to $58.03. One trader sold 5,300 Nov 60 puts to collect $3.30 per contract. Meanwhile, it appears that Oct 57.5 puts are being bought-to-open. The top trade is 3,643 contracts at the offer for 60 cents on ISE and is possibly a non-customer or firm buyer. 17,250 now traded vs. 4,712 in open interest. 85 percent hit ask-side. Some investors might be bracing for a pullback in COST before next week's October expiration. Monthly retail sales numbers are due Wednesday.

Implied Volatility Movers

Acorda Therapeutics (ACOR) is down 14.3 percent to $19.09 and implied volatility is higher after Bloomberg reported that the company's MS drug might need more study. The report comes after ACOR released FDA briefing documents for the review of its Fampridine-SR. In the options market, volume is running 8X the usual and implied volatility (average) is rallying to 156, from about 138 late yesterday.

Implied volatility is also higher in American Superconductor (AMSC), Riverbed Technology (RVBD), and Liberty Media (LINTA). Implied volatility is falling in Infosys (INFY), Citi (C), and the S&P 500 Index (^SPX).

Comments

[JamesApple:]

MSFT should buy out rapidly deteriorating Rim in an effort to maintain the remaining BES clients from stampeding to Apple and IBM, in doing so MSFT can stand to profit from a 34% market share of the lucrative American enterprise mobile business. MSFT profits mainly from enterprise businesses, it is only logical for MSFT to cut the embellical cord to the losing consumer markets once it acquires Rim and concede this lost market segment to Apple, and fight with Apple over the enterprise turf. I foresee MSFT takeover Rim @ $82.00

Oct 09 05:14 PM

[Duude:]

MSFT buying RIMM won't stop people from moving to Apple, it will only encourage those that haven't yet moved. The Microsoft name is a warning cry to get out, its over. Microsoft acknowledges this in private, and it also fits in with their internalized approach to develop things internally. It doesn't matter that most all the world understands Microsoft produces crap, what matters is Microsoft is in denial. Its a pride thing.

Oct 09 07:32 PM

[JamesApple:]

Windows 7, Server 2010 and related lifecycle products such as VS2010, .Net Framework 4, are MSFT's hope to plow out a spot in the future after year 2010. MSFT is fending off Apple, Unix/Linux OS encroachments. While MS Office has clearly beaten out OpenOffice, Corel, MS Office is unable to make inroads outside of desktops and Notebooks. WinMo is disappearing like Blackberry OS, Palm OS to the onslaught of iPhone OS, and perhaps Android and webOS later, forcing MSFT to double its effort on enticing it's enterprise customers with a more cohesive Microsoft infrastructure that covers more enterprise needs, thus the acquisition of Rim and its remaining enterprise customers makes perfect sense instead of MSFT continuously pour money into the dwindling WinMo customers. Since the Windows 7 interface looks remarkably similar to the Apple interface, adapting the WinMo 7 to the Windows 7 and making it available on the Blackberries replacing the outdated Blackberry OS and allowing the Blackberries to run MS Office can be a big boost playing to MSFT's strengths, whereas current Blackberry users are quite impatient being handcuffed to email and messaging services. Although carriers have been heavily promoting Blackberries along with the Buy 1 Get 1 Free Blackberry campaingns, people are tired of Blackberries forcing the carriers to feature non Blackberry phones such as Motorola and HTC in hopes of preventing an all Apple Christmas, which is how things look like. Windows 7 is being released this month for the same reason. Will these tactics work? My own feeling is this will be almost an all Apple Christmas, and this will give a big push for MSFT to take over Rim sooner.

Oct 09 09:34 PM

[1835gloria:]

Why in the world would you think Microsoft would want to buy RIMM or RIMM would want to be bought by Microsoft? They have made it O'K for years with the usual ups and downs for both!


On Oct 09 09:34 PM JamesApple wrote:

> Windows 7, Server 2010 and related lifecycle products such as VS2010,
> .Net Framework 4, are MSFT's hope to plow out a spot in the future
> after year 2010. MSFT is fending off Apple, Unix/Linux OS encroachments.
> While MS Office has clearly beaten out OpenOffice, Corel, MS Office
> is unable to make inroads outside of desktops and Notebooks. WinMo
> is disappearing like Blackberry OS, Palm OS to the onslaught of iPhone
> OS, and perhaps Android and webOS later, forcing MSFT to double its
> effort on enticing it's enterprise customers with a more cohesive
> Microsoft infrastructure that covers more enterprise needs, thus
> the acquisition of Rim and its remaining enterprise customers makes
> perfect sense instead of MSFT continuously pour money into the dwindling
> WinMo customers. Since the Windows 7 interface looks remarkably similar
> to the Apple interface, adapting the WinMo 7 to the Windows 7 and
> making it available on the Blackberries replacing the outdated Blackberry
> OS and allowing the Blackberries to run MS Office can be a big boost
> playing to MSFT's strengths, whereas current Blackberry users are
> quite impatient being handcuffed to email and messaging services.
> Although carriers have been heavily promoting Blackberries along
> with the Buy 1 Get 1 Free Blackberry campaingns, people are tired
> of Blackberries forcing the carriers to feature non Blackberry phones
> such as Motorola and HTC in hopes of preventing an all Apple Christmas,
> which is how things look like. Windows 7 is being released this month
> for the same reason. Will these tactics work? My own feeling is this
> will be almost an all Apple Christmas, and this will give a big push
> for MSFT to take over Rim sooner.

Oct 11 12:37 AM

[JamesApple:]

Rim is not the company it used to be. Rim is likely to go bankrupt in the coming years as competition eat into Rim's businesses.

Oct 11 01:28 AM