Friday Options Recap

by: Frederic Ruffy


Stocks are holding modest gains following a round of mixed economic news Friday. Data released before the opening bell showed fourth quarter GDP rising a better-than-expected 5.9 percent. A bit later, the Chicago PMI, a gauge of regional manufacturing activity, also exceeded economist estimates. However, the latest UofM consumer sentiment index showed modest deterioration and a report on existing home sales fell well short of expectations.

In the end, the day's data was decidedly mixed and failed to stir much volatility in the equity market. Volume is also light, as another winter storm pounds the Northeast. The Dow Jones Industrial Average has traded in an 81-point range and is up 23 points heading into the final forty-five minutes. The CBOE Volatility Index (.VIX) lost .71 to 19.39. Trading in the options market is on the light side, with 4.7 million calls and 3.8 million puts traded so far.

Bullish Flow

UAL (UAUA) outperforms. The sector caught a bid early after the latest GDP numbers came in above estimates (Q2 at 5.9 percent vs. 5.7 percent consensus). UAUA shares then saw a morning spike and touched a new 52-week high. The stock was recently up 88 cents to $16.54, session highs, and some players might be closing out positions in March 15 puts. 6400 traded (vs. 41.9K in open interest).

AMR (AMR) is up 28 cents to $9.21 amid relative strength in the airlines (see UAUA color). Options action is heating up as well. March 10 calls are the most actives and includes blocks at 14 cents each on ISE, which are opening buyers, according to ISEE data. 11.8K now traded vs. 7023 in open interest. Apr 10 calls seeing interest as well.

Bearish Flow

Toll Brothers (NYSE:TOL) is down 25 cents to $18.48 and options volume is running 3X the average daily ahead of housing numbers (10:00 a.m.). Most of the action is due to a June 18 straddle seller, collecting $3.10, 9200X and apparently opening a new position. It was not tied and probably a position in anticipation of TOL drifting towards the $18 level in the months ahead.

Implied Volatility Movers

The CBOE Volatility Index (.VIX) is down .67 to 19.43 and near session lows, as trading slows ahead of the weekend. Volume in the index market is very light, with 336,000 calls and 373,000 puts traded across all the cash indexes, which is about 63 percent the typical volume. The lack of hedging activity has VIX moving lower. That might change, however, as next week holds a very busy economic calendar -- including key monthly jobs data on Friday.

Unusual Volume Movers

United Healthcare (NYSE:UNH) is seeing 2X average daily trading volume, with 47,000 contracts traded and put volume representing about 53 percent of today's activity.

Sirius Satellite (NASDAQ:SIRI) is seeing 2X average trading volume, with 36,000 contracts traded and calls representing 80 percent of today's trading activity.

Lennar (NYSE:LEN) is seeing 6X normal trading volume. 33,000 contracts traded, with put options representing about 95 percent of today's volume.

Unusual volume (two times or more than normal average volume) is also being seen in the Select Sector Basic Materials Fund (NYSEARCA:XLB), the SPDR Homebuilders Trust (NYSEARCA:XHB), and the CurrencyShares Euro Trust (NYSEARCA:FXE).