Monday Options Recap

by: Frederic Ruffy


Stocks are holding modest gains in another day of rather slow market action Monday. The consumer was in focus early after data showed spending up .3 percent in February, which was in-line with economist forecasts. Incomes were flat, and a bit less than the .1 percent uptick that had been forecast. The market didn't show much reaction to the data. Meanwhile, major averages across Europe finished with modest gains on diminishing concerns about debt problems in Greece. The dollar fell, but gold and oil moved higher. Crude added $2.25 to $82.25 a barrel and gold gained $5 to $1094 an ounce.

The Dow Jones Industrial Average has traded in another narrow 67-point range and is up 50 in the final hour. The NASDAQ added 8. The CBOE Volatility Index (.VIX) is up .04 to 17.81. Trading in the options market is on the light side. Approximately 4 million puts and 5.4 million calls traded so far.

Bullish Flow

UBS (NYSE:UBS) is up 63 cents to $16.10 and options order flow is bullish after Bloomberg reported the bank's first quarter fixed income revenue was said to be $2.3 billion. Shares saw an immediate spike on the news and April calls at the 15, 16, and 17 strikes are the most actives. 6,650 calls and 215 puts traded total. Implied volatility is up about 2.5 percent to 31.

Unusual activity in MEMC (WFR) today. Shares are down a nickel to $14.63 and 29K calls now traded, compared to 5,750 puts. The action includes the buyer of 4500 April 14 – May 15 call spreads at a nickel, which might roll a bullish position from one month to the next (The spread has traded 9000X total). May 18 and April 15 calls are among the most actives. May 15, April 14, and May 14 puts are busy as well. Implied volatility is up 3 percent to 43.5, but with no obvious news to explain the jump in WFR options activity Monday morning.

Bearish Flow

Citigroup (NYSE:C) is seeing a day of brisk trading after the US Treasury said it would begin selling Citi stock. The Treasury will sell about 7.7 billion shares acquired as part of a 2009 agreement that allowed the government to get common stock in exchange for preferred shares. The news has Citi shares down 14 cents to $4.17 and 862K options traded by midday. January 2012 calls at the 7.5 strike are the most actives, with some premium writers collecting 35 cents against shares. 112K contracts now traded. 87.7K April 4 puts traded (68% Bid). Jan 5 calls, April 4 calls, Jan 4 puts, June 5 calls are very busy as well. Implied volatility is holding around 41, and not significantly changed despite today's news.

Unusual Volume Movers

US Natural Gas Fund (NYSEARCA:UNG) options volume is running 2X the usual, with 163,000 contracts traded and call activity representing about 79 percent of the activity.

IShares Taiwan Fund (NYSEARCA:EWT) options activity is running 5X the usual, with 51,000 contracts traded and put volume representing 99 percent of the volume.

Talbot's (NYSE:TLB) options volume is running 3X the usual, with 50,000 traded and call volume representing 78 percent of the activity.

Unusual volume is also being seen in Lorillard (NYSE:LO), Arena Pharm (NASDAQ:ARNA), and Interoil (NYSE:IOC).