Thursday Options Recap

 |  Includes: ANN, BMY, C, CAKE, EEM, GME, GOOG, UPS
by: Frederic Ruffy


Stock market averages slipped early Thursday after the Labor Department said weekly jobless claims fell by 6,000 to 462,000 in the first week of March. Economists were looking for a decline to 460,000. Continuing claims for the end of February increased to 4.558 mln from 4.521 mln and more than the 4.5 mln economists were expecting. Separate data showed the Trade Balance narrowing to $37.3 billion in January, down from $39.9 billion in December thanks to falling imports. Economists were looking for a wider $41 billion deficit.

Beyond the disappointing data, there hasn't been much news to guide the action and the market averages have been rangebound for a fourth time this week. With an hour left to trade, both the Dow Jones Industrial Average and the NASDAQ have bounced back from early losses and are flat. The CBOE Volatility Index (.VIX) is also unchanged 18.87. Trading in the options market remains active, however, with about 6.5 million calls and 5.6 million puts traded so far.

Bullish Flow

Ann Taylor (NYSE:ANN) is off 3 cents to $19 and 5140 March 20 calls trade ahead of earnings, tomorrow a.m. 87 percent trade at the ask and implied volatility (average) is up 4 percent to 70 ahead of the news. Looks like call buyers initiating trades on optimism about Ann's earnings. Shares gapped higher and added 17.6 percent on Feb 2 after the company raised fourth quarter revenue guidance. The stock is up more than 40 percent since that time.

Interest in Citi (NYSE:C) calls continues. 1.47 million traded in the name yesterday, creating 223,000 contracts in new open interest. Today, shares are up 14 cents to $4.14 and, in morning action, one player pays 10 cents for June 5 calls, 50000X -- which is the biggest equity options trade of the day. Another 1.3 million Citi calls traded total.

Bearish Flow

Cheesecake Factory (NASDAQ:CAKE) touched a new 52-week high and was recently up 60 cents to $26.63. Options volume is running 10X the average daily, with some unusual activity seen in July and October puts. A total of 20K puts traded, compared to 2290 call options. July 22.5s are the most actives. 7723 traded (89 percent ask). The top two trades were 607 and 594 contracts at 65 cents. July 20 puts are trading 92 percent on the bid and so some of today's flow might be spreads. July 25, 17.5, Oct 20, and Oct 17.5 puts are seeing interest as well, with volume exceeding open interest in all six contracts. No news today. CAKE was the subject of a downgrade Tuesday (MKM Partners to Neutral). Implied volatility is flat around 35 percent.

Implied Volatility Movers

Amylin Pharmaceuticals (AMLN) notched a new 52-week high of $22.05, but was recently down .68 to $20.22 ahead of an FDA decision on the company's EQW-exenatide once-weekly treatment for diabetes. News is expected tomorrow, March 12. Options action is brisk and implied volatility is rallying. One player collected 35 cents on the March 15 put - April 24 bearish risk reversal, 4400X. It was tied to shares at $19.80, delta neutral. Looks like the bullish March 17.5 - 25 risk reversal traded at 15 cents, 5000X. Meanwhile, implied volatility is up about 30 percent to about 207 ahead of the decision.

Unusual Volume Movers

Citi (C) is seeing 4X average daily trading volume, with 1.75 million contracts traded and call volume representing about 74 percent of today's activity.

iShares Emerging Markets Fund (NYSEARCA:EEM) is seeing 2X average trading volume, with 207,000 contracts traded and puts representing 55 percent of today's trading activity.

Amylin Pharmaceuticals (AMLN) is seeing 7X normal trading volume. 157,000 contracts traded, with call options representing about 62 percent of today's volume.

Unusual volume (two times or more than normal average volume) is also being seen in Gamestop (NYSE:GME), Google (NASDAQ:GOOG), and UPS (NYSE:UPS).