Tuesday Options Recap

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 |  Includes: GRMN, HK, MDLZ, NVS, ORCL, PCP, RCPI, SD, SRS, VALE, VVUS
by: Frederic Ruffy

Sentiment

Stocks are holding modest gains thanks to better-than-expected housing data Tuesday. With little news to guide the market action, the focus turned to existing home sales numbers at 10:00 a.m. Eastern time. The report showed sales falling to an annual rate of 5.02 million homes in February, down from 5.05 million in January, but better than the 5 million sales that economists were expecting. A separate report showed the FHFA Home Price Index down .6 percent in January, which was also not as bad as the .8 percent drop that economists had expected.

The major averages edged higher on the news and from that point forward, market action has slowed. Heading into the final hour, the Dow Jones Industrial Average is up 60 points and the NASDAQ is up 9.7. The CBOE Volatility Index (.VIX) is off .26 to 16.61. Approximately 3.9 million puts and 5.3 million calls traded across the eight options exchanges.

Bullish Flow

Vivus (NASDAQ:VVUS) is up 67 cents to $9.58 and 12K calls traded on unconfirmed chatter that Novartis (NYSE:NVS) might be looking to buy rights to Qnexa. Shares are up and some traders are focused on April 10 calls, with more than 6000 traded. May 10, 11, 12, 13; April 9, 11; Jan 7.5, and Sep 14 calls are seeing interest as well. Most have been in smaller lots. The top trade is 161 May 13 calls at 20 cents. Implied volatility is up about 1/2 percent to 59.

Petrohawk (NYSE:HK) is up 26 cents to $19.82 and the Jun 21 – 25 call spread trades 7500X. Looks like a buyer paying 95 cents and opening a bullish play on the Houston, Tex. independent oil and gas company (21s look opening). No news on the stock. The company is presenting this morning at a Howard Weil energy conference (as of 8:50 eastern time.)

Bearish Flow

Big Prints in the ProShares UltraShort Real Estate ETF (NYSEARCA:SRS) after an investor paid 27 cents for the July 6-8 call spread, 40000X on the PHLX. Shares are up 13 cents to $6.06 and this looks like a new bullish bet on a bearish fund.

Implied Volatility Movers

Star Scientific (CIGX) is up 19 percent to $2.26 in active trading and options flow is bullish, with 9700 calls and 855 puts traded so far. April 1, 1.5, 2, 2.5, 3, 4, 5 calls are seeing the bulk of order flow. May 2, 2.5 calls seeing interest as well. No news to explain the strength in the shares or the interest in CIGX calls. Implied volatility is up 40 percent to about 180.

Unusual Volume Movers

Vale (NYSE:VALE) options volume is running 2X the usual, with 139,000 contracts traded and call activity representing about 62 percent of the activity.

Oracle (NYSE:ORCL) options activity is running 2X the usual, with 33,000 contracts traded and call volume representing 78 percent of the volume.

Titanium Metals (TIE) options volume is running 16X the usual, with 46,000 traded and call volume representing 89 percent of the activity.

Unusual volume is also being seen in Kraft (KFT), Garmin (NASDAQ:GRMN), and Sandridge (NYSE:SD).