Monday Options Recap

Sentiment

The S&P 500 Index is down for a fourth time in five days, as a cautious underlying tone continues through the earnings reporting season. The major average opened higher, with better-than-expected earnings from Marvell Tech (MRVL) helping the tech sector and Radioshack's (RSH) results giving a lift to some of the consumer names.

However, Dow component Verizon (VZ) slipped after earnings met Street estimates and BofA (BAC) sank after the Wall Street Journal reported that its plans to repay TARP funds might have hit a snag. BofA (BAC) is down 5 percent and the biggest loser in the Dow Jones Industrial Average.

Chevron Texaco (CVX) and Exxon Mobile (XOM) are also in the red after a rebound in the dollar sent crude oil prices lower midday Monday. Crude is down $1.80 to $78.70 a barrel. Gold sank $17 to $1039.40 an ounce.

Twenty-six Dow stocks are lower, four higher, and the industrial average is down 8 5 points heading into the final hour of trading. The CBOE Volatility Index (.VIX) jumped 2.26 to 24.53. Trading in the options market remains active, with 5.6 million puts and 6.4 million calls traded so far (a ratio of .87, compared to a 22-day average of .80).

Bullish Flow

SanDisk (SNDK) is bucking the bearish trend Monday. Shares have been grinding higher in active trading throughout the day and were recently up $1.93 to $24.05. In the options market, trading is brisk. 53K calls and 20K puts traded so far. Jan2010 calls at the 27 line are the most actives. 8,269 traded (20% Bid / 27% Mid / 53% Ask). No headlines to explain the relative strength or the heavy call activity in SNDK Monday. Shares rallied on earnings last week. Implied volatility (average) is moving as well, to 48.7, from about 42.7 late Friday.

BofA (BAC) is down 5.7 percent and the biggest loser in the Dow Jones Industrial Average after the Wall Street Journal reported that the company's plans to repay TARP funds and escape the government's grasp might have hit a snag. The top options trades seem to reflect a bullish short-term view on the bank, however, after a strategist paid 50 cents for the Jan2010 16-17.5 call spread, 20000X.

Bearish Flow

AMR is down 33 cents to $5.98 and Dec 6 puts are being bought-to-open after European regulators informed British Airways and AMR's American Airlines that they might be forced to give up landing slots if they want their Oneworld planned transatlantic partnership to go ahead. The top two options trades: 4534 and 2310 Dec 6 puts for 60 and 65 cents on the ISE, which are both opening customer buyers, according to sentiment data. 10,197 now traded vs. 760 in open interest. Implied volatility (average) in AMR is moving up to 66.5, from about 61 late Friday.

Implied Volatility Movers

Novavax (NVAX) is up 24 cents to $4.28 and 4,229 Nov 5 calls traded. Shares are up and players are opening new positions on talk the company might receive an emergency use authorization similar to the one given to BCRX. Implied vols (average) are jumping as well, to 100, from about 89 late Friday.

Implied volatility is also higher in AMR, BofA (BAC), and the S&P 500 (SPX). Meanwhile, implied volatility is lower in Biocryst (BCRX), Marvell Technology (MRVL), and RadioShack (RSH).