Thursday Options Recap: Brisk into Expirations

by: Frederic Ruffy


The major averages are modestly higher despite a round of disappointing economic data Thursday. Data released before the opening bell on Wall Street showed retail sales falling .3 percent in December, and significantly worse than the +.5 percent that economists were expecting. Meanwhile, separate data showed a larger-than-expected (11K) uptick in weekly jobless claims in the period ended January 9.

Yet, while stock index futures slipped on the news, the stock market averages opened steady and were modestly higher midday. With 50 minutes left to trade, the Dow Jones Industrial Average is now up 38 points and near session highs. The NASDAQ added 14 points ahead of earnings from Intel (NASDAQ:INTC), due out after the closing bell.

Trading in the options market is brisk, as today and tomorrow are the last two trading days for January 2010 options contracts. Many index options cease trading today. A total of 5.5 million puts and 9 million calls traded so far (a ratio of .61, compared to a 22-day average of .65.)

Bullish Flow

Eastman Kodak (EK) is seeing a day of heavy trading after the company filed lawsuits alleging Apple (NASDAQ:AAPL) and RIM (RIMM) infringed on EK's digital technology. Eastman is looking for the ITC to prevent the two tech companies from importing infringing devices to certain mobile phones and other devices featuring digital cameras. EK is up 17 cents to $5.10 and options volume is running 17X the average daily. 29K calls and 9,060 puts traded. The action includes 13.9K Jan 5 calls, with some players possibly closing out buy-writes; as 7000 contracts traded at the offer this morning (25 cents) were tied to 305K shares at $5.18.

Las Vegas Sands (NYSE:LVS) runs 63 cents higher, to $18.92, and 4155 Jan 19 calls traded (62 percent Ask) early. There's vague talk making the rounds about new licenses to operate at Cotai Ferry. More than 20000 calls now traded.

Bearish Flow

Cadbury (CBY) is up a dime to $51.99 and options volume is 6X the recent average daily, driven by a Feb 45 - 50 put spread at 95 cents, 7170X on CBOE. The spread was traded customer-to-customer this morning just before 11:00 eastern time, according to an exchange-floor contact. It's a bearish trade for the spread buyer, as it makes its best profits if CBY falls to $45 or less by the February options expiration.

Implied Volatility Movers

Medifast (NYSE:MED) shareholders are probably searching for some meds today after shares sank $4.85 to $22.15 on news a securities law firm has opened an investigation alleging violations of securities laws by Medifast. Shares sank and options volume is 2X the average daily, with 6470 puts and 2780 calls traded so far. Jan and Feb 22.5 puts are the most actives and implied volatility (Feb 22.5s) is up 10 percent, to 95, now that the stock has suffered a 7-day 33 percent drop.

Unusual Volume Movers

US Natural Gas Fund (NYSEARCA:UNG) is seeing 2X average daily trading volume, with 179,000 contracts traded and call volume representing about 50 percent of today's activity.

Microsoft (NASDAQ:MSFT) is seeing 2X average trading volume, with 193,000 contracts traded and calls representing 72 percent of today's trading activity.

Intel (INTC) is seeing 6X normal trading volume. 591,000 contracts have traded, with call options representing about 64 percent of today's volume.

Unusual volume (two times or more than normal average volume) is also being seen in Baidu (NASDAQ:BIDU), Petrobras (NYSE:PBR), and First Solar (NASDAQ:FSLR).

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