Thursday Options Recap

by: Frederic Ruffy


Economic data was back in focus Thursday. Stock index futures ticked a bit higher before the exchanges opened in New York after the Labor Department said that weekly jobless claims fell by 29,000 to 469,000 in the final week of February. Economists were looking for a drop of 28,000. Although the number was not far from expectations, it holds some sway because it comes ahead of key monthly numbers tomorrow morning. Economists expect Friday's report to show the economy losing 65,000 jobs and an unemployment rate of 9.8 percent.

The rest of the day's data was mixed. Fourth quarter productivity rose at a 6.9 percent annual rate, up from 6.2 percent in the third quarter and better than the 6.3 percent increase that economists had expected. Factory orders edged up 1.7 percent and in-line with expectations. However, pending home sales showed a surprise drop of 7.6 percent in January, much worse than the 1 percent increase that economists had predicted.

In the end, the data didn't seem to matter too much. The Dow Jones Industrial Average has traded in a narrow 58-point range and is up 29 points heading into the final hour. The CBOE Volatility Index (.VIX) added .13 to 18.96. Trading in the options market is running about the normal pace, with 5.2 million calls and 4.8 million puts traded so far.

Bullish Flow

Cephalon (NASDAQ:CEPH), which saw active trading yesterday on renewed takeover speculation, is off 50 cents to $70.31 and total options volume is 5X the recent average daily today. May 65 - Aug 75 call spread has traded more than 6500X, and appears to include some rolling of in-the-money May calls to the out-of-the-money August calls. This investor might be banking some profits in the 65s after an 11.7 percent year-to-date gain in the share price (29 percent since Nov 23), but then opening a similar bullish position in the 75s. (NASDAQ:BIDU) with a high volume spike late Thursday, is now up $6.20 to $523.22. Options action picking up somewhat, with 4460 calls and 7700 puts traded. Recent trades include lots of March 530 puts on the bid. Looks like sellers collecting $15.60.

Bearish Flow

Varian Semiconductor (NASDAQ:VSEA) is seeing relative weakness and increasing put activity Thursday. Shares are down 67 cents to $30.72 and falling to session lows. Options volume is 7X the average daily. 3600 puts and 80 calls traded. Investors are showing interest in April 35, Aug 30, May 30, May 35, and Aug 35 puts. Implied volatility is up about 2 percent to 38. The cautious trading comes ahead of presentation at the Morgan Stanley Technology, Media and Telecom Conference in San Francisco, California at 10:05 am Pacific Standard Time.

Implied Volatility Movers

TiVo (NASDAQ:TIVO) shares rally $4.40 to $14.61 and options action heats up midday Thursday after an appeals court rules against Dish (NASDAQ:DISH) in a contempt case. Shares rallied to 52-week highs on the news. 25K calls and 13K puts traded so far. March 10 puts are the most actives. March 10, 12.5, and 15 calls are busy as well. The IV crush is on — down 37 percent to about 85.

Unusual Volume Movers

Powershares Bullish Dollar Fund (NYSEARCA:UUP) is seeing 4X average daily trading volume, with 168,000 contracts traded and call volume representing about 99 percent of today's activity.

United Healthcare (NYSE:UNH) is seeing 3X average trading volume, with 90,000 contracts traded and puts representing 65 percent of today's trading activity.

Applied Materials (NASDAQ:AMAT) is seeing 6X normal trading volume. 83,000 contracts traded, with call options representing about 51 percent of today's volume.

Unusual volume (two times or more than normal average volume) is also being seen in Ciena (NASDAQ:CIEN), AK Steel (NYSE:AKS), and Abercrombie (NYSE:ANF).

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