Tuesday Options Recap

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Includes: BBBY, CTL, F, FNMA, LOW, MDT, NFLX, SLV, VVUS
by: Frederic Ruffy

Sentiment

With very little earnings or other stock news to guide the morning action, economic data was in focus early Tuesday. Data released before the bell showed home price numbers falling a bit more than expected. According to the CaseShiller City Index, prices fell 7.28 percent in October — better than the -9.27 percent in September, but worse than the 7.1 percent economists had expected.

Separate data released at 10:00 eastern time showed the Conference's Board Consumer Confidence Index improving to 52.9 in December, up from 50.6 the month before and roughly in-line with expectations.

The data didn't seem to matter much and, instead, the market action remains rangebound and uneventful. The Dow Jones Industrial Average traded in another narrow 33 point range and is up 20 heading into the final hour. The CBOE Volatility Index (.VIX) edged down .14 to 19.79. Trading in the options market remains light, with 3.3 million puts and 4.4 million calls traded so far (a ratio of .75, compared to a 22-day average of .69.)

Bullish Flow

Qwest (NYSE:Q) is down 4 cents to $4.27 and some investors are dialing in to Qwest calls, with more than 8,000 traded. The volume represents 23X the expected for the first hour of trading and compares to 220 puts. Most of the action is in the Jan - April 5 call spread, which has traded 3900X. Looks like a buyer paying 14 cents (collecting a penny to close out positions in Jans) and, since ISEE data indicate that half are opening buyers, this looks like rolling. Open interest in the Jan 5 calls is 87,695 and the most of any Qwest options contract.

Bearish Flow

Big Prints in Ford Motor (NYSE:F) after an investor buys 17K Feb 7 puts at 7 cents apiece and 12K Feb 8 puts at 12 cents each. Shares are down 6 cents to $14.16. The action stands in contrast to yesterday, when shares hit a new 52-week high, settled up 7 cents to $10.20, and 62K calls and 19K puts traded on the automaker. However, open interest data suggest that less than 7,000 of yesterday's calls were opening trades (compared to +8652 puts). No headlines yet on Ford this week. Earnings expected late January.

Implied Volatility Movers

Vivus (NASDAQ:VVUS) added 3 percent after submitting a new application for an obesity drug Tuesday morning. Shares are up and implied volatility is falling back towards 93, from about 105 late Monday.

Unusual Volume Movers

iShares Silver Fund (NYSEARCA:SLV) is seeing 5X average daily trading volume, with 200,000 contracts traded and put volume representing 91 percent of today's activity.

Lowe's (NYSE:LOW) is seeing 3X average trading volume, with 38,000 contracts traded and calls representing 51 percent of today's trading activity.

Fannie Mae (FNM) is seeing 2X normal trading volume. 17,000 contracts have traded, with call options representing about 73 percent of today's volume.

Unusual volume (two times or more than normal average volume) is also being seen in Bed, Bath and Beyond (NASDAQ:BBBY), Medtronic (NYSE:MDT), and Netflix (NASDAQ:NFLX).