Tuesday Options Recap

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 |  Includes: ALTR, BP, F, SAN, VVUS, WM, WU, XLF, XLNX
by: Frederic Ruffy

Sentiment

Credit market fears resurfaced Tuesday after S&P downgraded the ratings of Portugal and Greece. The downgrades come the same day spreads between Greek and German debt hit 12 year highs and Greece's equity market tumbled 7 percent. Meanwhile, some players are fixated on Goldman Sachs (NYSE:GS), as executives face a grilling before a Senate subcommittee today. Shares rallied to session highs around $156 as executives had an opportunity to respond to the allegations. GS was recently up $2.51 to $154.54. However, the focus on problems in the debt markets and the financial world overshadowed the day's other news, which also included a much better-than-expected reading on consumer confidence (57.9 vs. 53.5 consensus) as well as a round of mixed earnings reports. The Dow Jones Industrial Average is down 130 points in the final hour. The NASDAQ lost 38. Trading in the options market is busy, with 8.2 million calls and 7.2 million puts traded so far.

Bullish Flow

Bullish flow detected in Vivus (NASDAQ:VVUS), the Mountain View, Calif., biotech. 6843 calls trading, or 3x the recent avg daily call volume. Shares are up 53 cents to $9.35 and June 9 calls are the most actives. 2665 traded (80% Ask). Another 1455 Jun 10s traded (93% Ask). Implied volatility is up about 8 percent to 51 after Brean Murray analysts initiated the stock with a Buy.

Waste Management (NYSE:WM) is down 57 cents to $35.09 and 6680 calls traded on the bank ahead of earnings, Thursday before market. The volume represents 4X the typical volume and compares to 480 puts. It includes a buyer of 2,500 Jan2012 40 calls at $2.20 in morning trading and a buyer of 2,500 January 2012 40 calls at $2.10 in more recent action. The call purchases might close an existing position, as open interest is 10.6K and the second largest position in the name. Implied volatility in WM is up about 5 percent, but remains low at 21.5.

Bearish Flow

Chip equipment maker Altera (NASDAQ:ALTR) is down 96 cents to $25.66 and has now lost 4.1 percent since reporting earnings on 4/20. In the options market, bearish flow is detected after 4385 puts traded, or 3X the recent average daily volume. It includes a buyer of 2378 May 27 puts at $1.40 each on CBOE. 2475 now traded vs. 238 in open interest. Another 1605 June 26 puts traded (98% Ask) vs. 1242 in open interest. Implied volatility is up about 7 percent to 30. On 4/20, Morgan Stanley added ALTR as a short Research Tactical Idea.

Implied Volatility Movers

Banco Santander (STD), the Spanish bank, is down 75 cents to $12.55 after S&P downgraded Portugal and Greek credit ratings Tuesday. In the options market, flow is bearish. 6310 puts and 1145 calls traded. Sep 10 puts trade 2730X (76% Ask). Another 1795 Jun 10 puts trade (63% Ask). Implied volatility is up about 12.5 percent to 52.5.

Unusual Volume Movers

Select Sector Financials (NYSEARCA:XLF) options volume is running 2X the usual, with 601,000 contracts traded and put activity representing about 73 percent of the activity.

Ford Motor (NYSE:F) options activity is running 2X the usual, with 508,000 contracts traded and call volume representing 75 percent of the volume.

BP (NYSE:BP) options volume is running 3X the usual, with 52,000 traded and put volume representing 70 percent of the activity.

Unusual volume is also being seen in Western Union (NYSE:WU), Xilinx (NASDAQ:XLNX), and Altera (ALTR).