Tuesday Options Recap

 |  Includes: CF, DELL, DNDN, F, FMCC, HIG, MU, PEP, SQNM, TSL
by: Frederic Ruffy


Stocks are holding modest gains on a slow news day Tuesday. With no economic data to guide the morning action, the focus was on the day's stock news. The fertilizer names grabbed the spotlight after CF Industries (NYSE:CF) made a $47 per share bid for Terra Industries (TRA). Domino's (NYSE:DPZ) added 5.5 percent after reporting better-than-expected earnings and revenues. MBIA (NYSE:MBI) is also up on earnings. However, Staples (NASDAQ:SPLS) fell 6 percent after its earnings failed to live up to Street expectations.

The automakers are seeing interest, with monthly sales numbers released Tuesday afternoon. After touching a new 52-week high, Ford Motor (NYSE:F) is flat at $12.40. Ford reported a better-than-expected 43 percent increase in February sales, but that good news might have been discounted after a 5.7 percent rally in Ford shares the day before.

Meanwhile, the Dow Jones Industrial Average has come off session highs and is up a few points heading into the final hour. The NASDAQ added 7. The CBOE Volatility Index (.VIX) is down .30 to 18.96. Trading in the options market is running a bit slower than usual, with 6.1 million calls and 4.6 million puts traded so far.

Bullish Flow

Freddie Mac (FRE) is up one penny to $1.17 and 12K Oct 1 puts traded. Like yesterday, the action looks like opening put writing in FRE. Yesterday, investors collected 10 cents on July 1 puts. Today, they're collecting 11, 12, 13 cents on Oct. 1 puts. These investors might be selling these $1 puts and be willing to buy FRE if shares fall below that level in the months ahead.

Sequenom (NASDAQ:SQNM) jumps $1.34 to $8.26 and 25K options traded in the first 20 minutes of Monday's session after Cantor Fitzgerald upgraded the biotech to Buy from Hold and raised the target to $16 from $4. The analysts met with management and cite settlement of class action along with advances in pipeline progress as reasons for the upgrade. 18K calls and 6,900 puts traded. March 9 call and April 8 puts are the most actives. Mar 7, Mar 8, Mar 10, and June 10 call seeing interest as well. Implied volatility is elevated, around 100, as investors brace for earnings. The results are expected soon, but no date has been set. A company spokesperson says the date should be announced 48 hours to one week before the company reports.

Bearish Flow

Trina Solar (NYSE:TSL) added 39 cents to $22.94 and option volume hit 9x the daily average, driven by the March 20. 5 - 24.5 bearish risk-reversal, which traded 7,000X on ISE. ISEE sentiment data confirm that 7000 puts were bought-to-open and, with shares running to session highs, this might be a collar on an existing position (i.e. shares, plus puts, and short calls) or a straight bearish risk - reversal (puts and short calls.)

Implied Volatility Movers

Dendreon (NASDAQ:DNDN) shares hit a low of $30.81 this morning on talk the FDA was asking outside doctors to sit on a panel related to Provenge. The chatter made the rounds early and was apparently driven by a note out of a boutique research firm. Well, it appears there was no substance to the report and the FDA has now publicly stated that it is not putting together an outside panel to review the product. Not only did shares bounce on the news, but DNDN touched a new 52-week high and is up $1.61 to $34.12 late Tuesday. Trading in the options market is brisk as well, with 40K calls and 64K puts traded. March 27 and 30 puts are the most actives. Implied volatility is up about 2 percent to 56.

Unusual Volume Movers

Ford Motor (F) is seeing 2X average daily trading volume, with 208,000 contracts traded and call volume representing about 60 percent of today's activity.

CF Industries (CF) is seeing 6X average trading volume, with 112,000 contracts traded and calls representing 59 percent of today's trading activity.

Pepsico (NYSE:PEP) is seeing 4X normal trading volume. 100,000 contracts traded, with call options representing about 94 percent of today's volume.

Unusual volume (two times or more than normal average volume) is also being seen in Dell (NASDAQ:DELL), Micron Tech (NASDAQ:MU), and Hartford (NYSE:HIG).