Monday Options Recap

by: Frederic Ruffy


Stocks are trading mixed in an uneventful day of market action Monday. With no earnings of significance or economic numbers to guide market action, the S&P 500 Index opened flat and saw a modest advance into mid-morning. Research In Motion (RIMM) helped the tech sector on an analyst upgrade (see Bullish Flow) and the NASDAQ is up 7.6 points.

The Dow Jones Industrial has traded in a very tight 45 point range and is flat heading into the final hour. The CBOE Volatility Index (.VIX) edged up .23 to 17.65. Trading in the options market is on the light side, with about 5.5 million calls and 4.4 million puts traded so far.

Bullish Flow

Research in Motion (RIMM) is up $3.28 to $72.78, the best gainer in the NASDAQ 100, and heading to session highs in active trading. Shares opened higher after BMO raised the stock to Outperform from Market perform and upped the price target to $80 from $75. The stock has been able to build on the early momentum and, in the options, 57000 calls now traded, or about 4X the typical activity for the first 90 minutes of trading. March 70 and 75 calls are the most actives, with 19.4K and 17.4K traded, respectively. Implied volatility is moving as well, up about 8 percent to 37.

Visa (NYSE:V) touched a new 52-week high and was recently up $1.74 to $90.25 amid strength in the credit card names (MA is up $6.76 to $246.30). In the options, Visa is active. 11,000 calls and 5640 puts traded so far. The top trades have been lots of March 85 puts at the ask. March 90 calls are the most actives. There is no news on V or MA today, but implied volatility is up 1.5 percent to 23.75, as it appears that premium buyers are taking positions in anticipation of increasing volatility in Visa over the next two weeks.

Bearish Flow

Wells Fargo (NYSE:WFC) is off 21 cents to $28.93 and one investor sells 10K April 26 puts at 29 cents each, to buy June 22.5 - 28 put spreads at $1.26, 5000X. Looks possibly like a roll out of April 26 puts and into the bearish June spread. However, open interest is sufficient to cover all around, so the spread might be closing as well.

Implied Volatility Movers

Palm (PALM), which hit a new 52-week low of $5.4 this morning, saw a spike midday and was recently up a nickel to $5.76. Option volume is still on the light side, with 18K calls and 12K puts traded. However, implied volatility in PALM has been moving higher for the past few weeks and is up another 2.5 percent to multi-week highs around 93.

Unusual Volume Movers

Citi (NYSE:C) is seeing 2X average daily trading volume, with 518,000 contracts traded and call volume representing about 76 percent of today's activity.

Intermune (NASDAQ:ITMN) is seeing 5X average trading volume, with 152,000 contracts traded and calls representing 57 percent of today's trading activity.

Cisco (NASDAQ:CSCO) is seeing 2X normal trading volume. 77,000 contracts traded, with call options representing about 75 percent of today's volume.

Unusual volume (two times or more than normal average volume) is also being seen in Dryships (NASDAQ:DRYS), McDonald's (NYSE:MCD), and EMC (EMC).