Monday Options Recap

by: Frederic Ruffy


Stocks are broadly higher after the latest retail sales numbers showed an increase of 1.4 percent in October. The increase was fueled by an uptick in auto sales. Excluding autos, sales rose just .2 percent. In addition, September numbers were revised sharply lower (-2.3 percent vs. an initial reading of -1.5 percent). Nevertheless, the headline number seemed to get most of the attention and, along with gains in overseas markets, the news helped set a positive tone for early trading on Wall Street.

Meanwhile, many of the energy, metals and mining names are seeing gains after crude oil jumped $2.50 to $78.85 a barrel and gold gained $22.80 to $1139.50 an ounce.

Exxon Mobil (NYSE:XOM), which was also mentioned favorably in the latest issue of Barron's, is up 2.2 percent and one of 27 Dow stocks in positive territory. Three are lower and, with 45 minutes left to trade, the industrial average is up 110 points. The CBOE Volatility Index (.VIX) slipped .15 to 23.2. Trading in the options market is active, with approximately 5.6 million puts and 7.7 million calls changed hands so far (a ratio of .73, compared to a 22-day average of .83).

Bullish Flow

Microsoft (NASDAQ:MSFT) is down 10 cents to $29.53 and shares are seeing relative weakness, as investors await the company's presentation at Wednesday's Professional Developers Conference. Oppenheimer notes today that the event could serve as an important catalyst for MSFT, as the co. sometimes unveils products and tech previews for developers, including a tech preview of Win7 last year. Meanwhile, MSFT calls are seeing heavy trading ahead of the event. 470K calls have traded on the software giant, 5X the normal and compares to 48K puts. While some of the activity is tied to a dividend trade (shares go ex-div tomorrow), early activitiy in the Nov and Jan10 30 calls this morning seemed to reflect some bullish positioning ahead of Microsoft's presentation.

iShares Silver Fund (NYSEARCA:SLV) calls are heavily traded. Shares are up 73 cents to $17.88 after silver jumped 85 cents to $18.23 (gold is up $16.30 to $1133 an ounce). In the options, 61K calls and 18K puts traded so far. Jan10 calls at the 17, 19, 21, and 23 lines are seeing active trading. Dec 17 puts are the most actives, with 11.35K traded.

Bearish Flow

DirecTV (DTV) hit a new 52-week high of $30.25 early, but has since moved back to unchanged at $29.82. In the options market, morning trades include a sweep of 4200 Nov 29 puts at the offer for 15 cents apiece, which was an opening customer buyer, according to sentiment data. 5217 now traded vs. 1041 of open interest. Implied volatility (average) has moved up to 37.3, from about 35.6, as some investors appear to be looking for further losses in DTV shares before the Nov options come off the board Friday.

Implied Volatility Movers

Bearish activity detected in Kinetic Concepts (NYSE:KCI), with 6288 puts trading, or 19x the recent avg daily put volume. Shares are down $1.24 to $34.76 and implied volatility is rallying to 52 (+13) on news the "FDA reporting preliminary public health notification with serious complications associated with Negative Pressure Wound Therapy Systems." Some players are bracing for additional downside in Nov 30 and 35 puts.

Unusual Volume Movers

Poniard Pharmaceuticals (OTCPK:PARD) is seeing 6X average daily trading volume, with 169,000 contracts traded and put volume representing 69 percent of today's activity.

Home Depot (NYSE:HD) is seeing 4X average trading volume, with 96,000 contracts traded and put volume representing 52 percent of today's trading activity.

Weatherford (NYSE:WFT) is seeing 3X normal trading volume. 93,000 contracts have traded, with calls representing 80 percent of today's volume.

Unusual volume (two times or more than normal average volume) is also being seen in Bristol Myers (NYSE:BMY), Target (NYSE:TGT), and DELL.