Thursday Options Recap

Sentiment

Stocks fell despite merger news, a better-than-expected earnings report from Wal-Mart (WMT), and data that showed a decline in weekly jobless claims. Wal-Mart is one of only 5 Dow stocks moving higher after the retailer reported a quarterly profit of 84 cents, which beat Street estimates by 3 cents. On the economic front, the latest weekly jobless claims showed some improvement. According to the Labor Department, filings fell by 12,000 to 502,000 in the week ended November 7. Economists were looking for a smaller 4,000 drop. Meanwhile, the tech sector was in focus on news H-P (HPQ) made a bid for 3Com (COMS) and Advanced Micro (AMD) rallied on news of a long-awaited settlement with Intel (INTC).

However, the tech-heavy NASDAQ gave up its early gains and weakness in the commodities markets sent many metals, mining and energy names lower. Crude oil is down $2.52 to $76.76 on bearish weekly inventory data. Gold lost $8.50 to $1106.10 after the buck bounced a bit higher against the euro.

Heading into the final forty minutes of trading, 25 Dow stocks are lower, only 5 higher and the industrial average is down 90 points. The CBOE Volatility Index (.VIX) jumped 1.28 to 24.32. Trading in the options market is on the light side. 4.9 million puts and 5.8 million calls have changed hands so far (a ratio of .84, compared to a 22-day average of .81).

Bullish Flow

Sinovac Biotech (SVA) sees a midday spike on volume and is up 77 cents to $9.63. Bullish flow detected in SVA options as well, with 5550 calls trading, or more than 2x the recent avg daily volume. Nov 10 calls are the most actives. 3196 traded (29 percent bid / 31 percent mid / and 40 percent ask). Implied volatility is elevated at 107.4 (-.4). Note: the biotech saw bullish flow last Friday as well on reports Beijing will extend an H1N1 flu vaccine innoculation to all the city’s 16 million residents. Shares are up 17.7 percent since that time.

Bearish Flow

Brocade (BRCD) is down $1.06 to $8.19 early Thursday and trading in the options market is brisk after HP (HPQ) made a bid for 3Coms (COMS), which apparently diminishes the probability that HP will buy BRCD. Shares are taking a hit and some premium sellers are likely exiting positions in BRCD calls on the merger news. Dec 10s are the most actives, with 3547 traded and 70 percent traded bid-side.

Implied Volatility Movers

Elan (ELN) implied volatility moved up amid unsubstantiated merger speculation Thursday. Shares hit a high of $6.59, but then backed off to unchanged at $6.37. Call volume jumped to more than 10,000 contracts and implied volatility rose to 84, from about 78.6 late Wednesday.

Implied volatility is also higher in QLogic (QLGC). Brocade (BRCD), Biocryst Pharmaceuticals (BCRX). Meanwhile, implied volatility is lower in Wal-Mart (WMT), Kohl’s (KSS), and Applied Materials (AMAT).

Unusual Volume Movers

Wal-Mart (WMT) is seeing 2X average daily trading volume, with 153,000 contracts traded and call volume representing 59 percent of today’s activity.

AMD is seeing 5X average trading volume, with 122,000 contracts traded and call volume representing 76 percent of today’s trading activity.

Brocade (BRCD) is seeing 3X normal trading volume. 99,000 contracts have traded, with calls representing 82 percent of today’s volume.

Unusual volume (two times or more than normal average volume) is also being seen in Disney (DIS), Dow Chemical (DOW), and 3Com (COMS).

Comments

[Options Tra...:]

total equities put call ratio is still inclined to call options as traders move from stock to options speculation in this toppy market.

Nov 12 08:31 PM