Friday Options Recap

by: Frederic Ruffy


Stocks are holding modest gains on a very slow news day. With no earnings or economic data to drive the morning trading Friday, the Dow Jones Industrial Average traded quietly in morning action and was up 25 points midday. From there, the action remained uneventful despite the quadruple witch options expiration. Gold is getting some attention as the yellow metal rallies to record levels near $1260 an ounce. Crude oil has also recovered losses and is up 45 cents to $77.24 a barrel. With an hour left to trade, the Dow is up 21 points and the NASDAQ added 2. The CBOE Volatility Index (.VIX) slipped 1.21 to 23.84. Options trading is running about the typical levels, with roughly 6 million calls and 5.3 million puts traded so far.

Bullish Flow

Transocean (NYSE:RIG) implied volatility is easing, as shares bounce after BP (NYSE:BP) Chief Executive Hayward survived a grilling before Congress Thursday and said the cause of the oil spill is still unknown. RIG added 2.9 percent to $50.85. About 10K puts and 6,240 calls traded in the first twenty minutes. Meanwhile, implied volatility is down 12 percent to 66.5 and lowest levels since late May. Implied volatility had moved into the triple digits when RIG shares fell to 52-week lows on June 9. The stock is up 21.4 percent since that time.

Cirrus Logic (NASDAQ:CRUS), which rallied 9.7 percent yesterday with help from positive comments from Mad Money’s Jim Cramer (see 6/17 color), is up another 84 cents to $17.84 today after Capstone raised the price target to $23 from $18. Another 8,650 calls and 2,680 puts traded, or 3.5X the recent average daily. June 17.5s are the most actives and likely seeing some offsetting trades ahead of the expiration. Implied volatility is down about 1.5 percent to 63.5.

Bearish Flow

Big Print in Oracle (NASDAQ:ORCL) as 35.7K of the Jan. $20 puts were bought at 98 cents each. 40K traded total and tied to 918,000 shares at $23.20 in what could be closing position as open interest is sufficient to cover. Or this might be a volatility play ahead of the software maker’s June 24 earnings release. Shares now up a nickel to $23.12 and ORCL implied volatility is flat at 28.5, compared to a 52-week high and low of 41 and 19.

Implied Volatility Movers

iShares Japan Fund (NYSEARCA:EWJ) with 4.5X the average daily options volume, with 35K puts and 2285 calls traded so far. Shares are flat at $9.67 and morning trades include a seller of 11K Sep 9 puts at 19 cents. It’s possibly closing, as 18.2K now traded and open interest is 19.8K. Meanwhile, Jan 7 – 8 (2X1) put ratio spread was possibly bought at even, 5000X. However, the two legs traded separately (both near the bid) and therefore this might be two different strategists at work. Implied volatility in the Japan fund is flat today, near 24, and down from about 30 at the start of the week — as a rebounding euro seems to have eased some of the recent anxiety about the European Debt Crisis and resulted in lower levels of overall volatility in global equity markets.

Unusual Volume Movers

Barrick Gold (NYSE:ABX) options activity is running 2X the usual, with 60,000 contracts traded and call volume representing 70 percent of the volume.

Newmont Mining (NYSE:NEM) options volume is running 2X the usual, with 49,000 traded and call volume representing 58 percent of the activity.

Unusual volume is also being seen in Continental Airlines (NYSE:CAL), Petrohawk (NYSE:HK), and Walgreen (WAG).