Monday Options Recap

by: Frederic Ruffy


The slow steady grind higher continues Monday. With no earnings of importance and no economic data to guide the market action, the major averages opened modestly higher. Some of the focus was on Europe, where nations agreed to help Greece with 30 billion euros. From there, it's been mostly sideways action. The Dow Jones Industrial Average has traded in a very narrow 36-point range and is up 23 points heading into the final hour. Overall options volume is on the light side, with 7.7 million calls and 4.4 million puts traded so far.

Bullish Flow

Microsoft (NASDAQ:MSFT) is off 2 cents to $30.32 and a noteworthy three-way trade today was Jan 30 – 35 call spread bought at $1.89 along with the sale of Jan 27.5 puts at $1.64, 6000X on AMEX. A 25-cent net debit was paid for the package ahead of earnings on April 22.

Market Vectors Gold Fund (NYSEARCA:GDX) is down 21 cents to $48.47 and one strategist is taking advantage of the weakness to create a bullish three-way spread, buying the May 50 – 54 call spread and selling May 46 puts, 12000X on ISE. They've traded in 2000 lots at credits — 2, 10, 15 cents, etc.

Bearish Flow

Huntington Bancshares (NASDAQ:HBAN) is up 4 cents to $5.89 and recent trades include a buyer of 2600 May 6 puts at 49 cents per contract. 3120 now traded vs. 693 in open interest. Implied volatility is up about 4 percent to 50. Looks like defensive trading and comes ahead of an April 21 earnings release.

Implied Volatility Movers

CBOE Volatility Index (.VIX) is down .74 to 15.40, session lows, and falling to levels not seen since July 2007. Today's slide has pushed the VIX below the May 19, 2008 low of 15.82 and follows a period of exceptionally quiet trading for the S&P 500, which has resulted in a SPX 20-day historical volatility of only 7.6 percent (60-day = 14.4%).

Unusual Volume Movers

PALM options volume is running 3X the usual, with 230,000 contracts traded and call activity representing about 62 percent of the activity.

Ambac (ABK) options activity is running 27X the usual, with 158,000 contracts traded and call volume representing 73 percent of the volume.

Nokia (NYSE:NOK) options volume is running 3X the usual, with 73,000 traded and call volume representing 53 percent of the activity.

Unusual volume is also being seen in (NYSE:CRM), EMC (EMC), and Texas Instruments (NYSE:TXN).