Tuesday Options Recap

by: Frederic Ruffy


Trading turned decidedly mixed Tuesday, after the day's economic news failed to stir the same enthusiasm witnessed on Wall Street the day before. After surging 156 points Monday, the Dow Jones Industrial Average opened flat ahead of economic news.

Then, at 10:00 a.m. eastern time, a report on Factory Orders surprised to the upside. Orders rose 1.1 percent in November, and much better than the .5 percent the Street was expecting. However, separate data showed pending home sales unexpectedly plunging 16 percent in November. Economists were expecting a smaller 2 percent drop.

In the end, the day's news didn't seem to justify another leg higher after the big gains seen Monday and the Dow Jones Industrial Average is down 35 points heading into the final 45 minutes of trading. The S&P 500 is up 1.1 points and the CBOE Volatility Index (.VIX) lost .37 to 19.67. Trading in the options market is active, with about 5.1 million puts and 11.2 million calls traded so far (a ratio of .45, compared to a 22-day average of .68. Note: the ratio is skewed by ex-div trades in T and VZ.)

Bullish Flow

Options action continues in STEC (NASDAQ:STEC), as the stock gains ground for the 14th time in 15 trading sessions. STEC added another $1.49 to $19.83 and is up 73.8 percent since December 11. The reason for today's strength isn't entirely clear (Deutsche Bank said yesterday STEC is the firm's top pick and shares are set to double). For whatever reason, shares are up and options action is heating up as well, with 30K contracts traded, or 2X the average daily. 20K calls and 9,390 puts changed hands so far. Jan 19 and 20 calls, as well as Feb 19 and 20 puts, are hitting ask-side, as players jockey for position ahead of the next move in shares of the Santa Ana, Calif. storage device maker.

Las Vegas Sands (NYSE:LVS) launched higher to start the New Year after UBS upgraded the stock to Buy yesterday, saying Macau revenue growth is likely to reach 18 percent in 2010. Today, Reuters reports that Macau casino stocks moved broadly higher in Asia on reports December revenues in the enclave rose 48 percent year-over-year, which signals sustained growth in the world's biggest gambling market. LVS is up another $1.26 to $17.88 and now, in less than two trading days, up nearly 20 percent year-to-date. In the options, another 49K LVS calls and 17K puts changed hands Tuesday, with some traders placing their bets on LVS Feb 18, 19, and 20 calls. Jan 17.5 call options are the most actives.

Bearish Flow

Atmel (NASDAQ:ATML), a San Jose, Calif. semiconductor company, hit a new 52-week high and settled up 23 cents to $4.84 Monday. In the options, sentiment seemed cautious after 4,550 puts and 750 calls traded. May and August 5 puts saw the bulk of the activity, with 2,170 and 2,370 contracts traded, respectively. In addition, with about 65 percent trading ask-side and total open interest in ATML puts increasing by 4,411 contracts (+304 calls), it looks like put buyers were taking new positions in puts on the chip company.

Implied Volatility Movers

Ford Motor (NYSE:F) options are heavily traded, as shares spike on better-than-expected December sales numbers. Ford saw a 32.8 percent increase in auto and truck sales last month much better than the 13 percent that analysts had predicted. 160K options have now traded on Ford, with 58 percent trading on the call side of the options chain. Jan 2010 calls at the 10 and 11 strike are the most actives. Feb $10 puts are seeing interest as well. Implied vols (average) are up 5.4 percent to 43.8.

Unusual Volume Movers

Ford Motor (F) is seeing 4X average daily trading volume, with 340,000 contracts traded and call volume representing 58 percent of today's activity.

Wells Fargo (NYSE:WFC) is seeing 2X average trading volume, with 277,000 contracts traded and calls representing 60 percent of today's trading activity.

Las Vegas Sands (LVS) is seeing 4X normal trading volume. 127,000 contracts have traded, with call options representing about 72 percent of today's volume.

Unusual volume (two times or more than normal average volume) is also being seen in Motorola (MOT), BB&T (NYSE:BBT), and Ciena (NASDAQ:CIEN).