Wednesday Options Recap

by: Frederic Ruffy


Stocks are lower on weaker-than-expected economic data Wednesday. A report released before the opening bell on Wall Street showed durable goods up just .5 percent in February, which fell short of the .6 percent increase that economists had expected. Separate data released later showed New Home Sales down to an annual rate of 308,000 in February, and worse than the 315,000 in home sales that economists had predicted.

The major averages fell on the data early and haven't staged any meaningful rally attempts. Heading into the final hour, the Dow Jones Industrial Average is off 55 points and the NASDAQ down 16. The CBOE Volatility Index (.VIX) jumped 1.25 to 17.60. Approximately 4.8 million puts and 5.8 million calls traded across the eight options exchanges.

Bullish Flow

Valero (NYSE:VLO) saw a morning spike to $20.76 and was recently up 23 cents to $20.53. Options action is heating up as well. The top trades are in the June 23 – 25 "stupid" call spread where an investor bought both contracts at 69 cents, 10000X (paying 43 cents for the June 23s). Another noteworthy trade is Jan11 20 – Sep 19 call diagonal spread at a penny, 1900X (bot Jan) and might be a roll of in-the-money Sep calls to near-the-money Jans.

TiVo (NASDAQ:TIVO) sees a morning spike to $16.67 (+.52) and early options action is focused on April 17 and 18 calls. In early action, 2268 April 17s (47% Mid/40% Ask) and 1880 April 18s (35% Mid/37% Ask) traded. Fly On the Wall cites renewed takeover speculation.

Bearish Flow

Two of the top options trades Tuesday surfaced in the SPYders (NYSEARCA:SPY) late in the trading session when an investor opened a Sep 98 – 110 put spread, 65555X on ISE. Looks like $2.27 was paid to open a new position and possibly a portfolio manager taking advantage of cheap vols to buy a hedge. The CBOE Volatility Index (.VIX) lost .52 to 16.35 yesterday, falling below 22-month closing lows set last week.

Implied Volatility Movers

Vivus (NASDAQ:VVUS) saw a spike to $10.03 on increasing volume and is up 67 cents to $9.58 on headlines that the company's CFO has canceled out of a Barclays Conference due to "travel issue." The news might have sparked speculation that other news is pending and comes just the day after chatter circulated that Novartis (NYSE:NVS) might be looking to buy the rights to Qnexa. Consequently, options action is heating up for a second day. 6856 April 10 calls and 1812 April 11 calls now traded. Implied volatility rallied about 15 percent to 79.

Unusual Volume Movers

Semiconductor HOLDRS (NYSEARCA:SMH) options volume is running 6X the usual, with 95,000 contracts traded and put activity representing about 83 percent of the activity.

Sprint Nextel (NYSE:S) options activity is running 4X the usual, with 92,000 contracts traded and call volume representing 72 percent of the volume.

Yahoo (NASDAQ:YHOO) options volume is running 2X the usual, with 86,000 traded and put volume representing 52 percent of the activity.

Unusual volume is also being seen in Symantec (NASDAQ:SYMC), Adobe (NASDAQ:ADBE), and Devon Energy (NYSE:DVN).