Friday Options Recap

by: Frederic Ruffy


The major averages are modestly higher on a relatively slow day of trading Friday. The table was set for early losses on Wall Street after the latest Gross Domestic Product report showed the US economy growing at a 2.7 percent annual rate in the first quarter, which was less than the 3 percent that economists had forecast. The early stock news was mixed, with Oracle (NASDAQ:ORCL) up on better than expected earnings, but BP (NYSE:BP) falling to 14-year lows and Research In Motion (RIMM) seeing post-earnings weakness. Yet, with help from a better than expected reading on June University of Michigan Consumer Sentiment (56 vs. 55.5 consensus), the major averages were mixed midday and now sporting modest gains heading into the close. The Dow Jones Industrial Average is up 17 points and the NASDAQ up 12. The CBOE Volatility Index (.VIX) is off 1.47 to 28.27. With 50 minutes left to trade, roughly 5.3 million calls and 4.6 million puts traded so far.

Bullish Flow

Citi (NYSE:C) shares are up 15 cents to $3.93 and July 4 call is today’s most actively traded contract. More than 118K traded vs. 547K in open interest. Looks like premium buyers are dominating the action and looking for a move beyond $4 by the July expiration (3 weeks), as 80 percent traded at the Ask. However, implied volatility is down about 5 percent to 39.5 now that lawmakers have agreed on FinReg. The bill is expected to pass both chambers next week before Obama signs it into law by July 4. It appears that shares are up, calls are active, and IV down on diminishing uncertainty

BP is down $1.30 to $27.44 and recent trades include a block of 6800 Jan 33 calls at $3.70 each. It was part of a purchase of 7000 contracts at $3.75 on AMEX and likely tied to a block of 700K shares at $27.15. Meanwhile, a three-way trade in August, after an investor apparently sold the 20 puts at $1.41 to buy the 30 – 35 call spread at $1.58, 5000X on CBOE. Looks opening.

Bearish Flow

Tyson (NYSE:TSN) is seeing relative weakness and increasing put volume. Shares are down 49 cents to $17.38 and one player bought 3,500 Oct 15 puts at 65 cents each on AMEX. 4000 now traded and implied volatility is up 2.5 percent to 45. TSN and other names in the industry (SFD, SAFM, HRL, PPC) saw strength yesterday on news Russia was lifting a ban on US poultry. However, TSN has given it all back and is falling to its lowest levels of the week, now down about 7 percent since June 15. Today's put buyers seem to be bracing for additional losses through October.

Implied Volatility Movers

Unusual options action in now Swiss-based Noble Corp (NYSE:NE). Shares of the offshore drilling company saw a morning spike to $29.72 and were recently up 54 cents to $29. Options volume is focused on July 30 calls. 21K now traded vs. 4,333 in open interest. Implied volatility is up 8.5 percent to 50.5, but with no obvious news to explain the bullish trading Friday morning.

Unusual Volume Movers

Research In Motion (RIMM) options volume is running 3.5X the usual, with 249,000 contracts traded and put activity representing about 50 percent of the activity.

Home Depot (NYSE:HD) options activity is running 2.5X the usual, with 67,000 contracts traded and put volume representing 82 percent of the volume.

Ciena (NASDAQ:CIEN) options volume is running 2X the usual, with 27,000 traded and put volume representing 61 percent of the activity.

Unusual volume is also being seen in Budget Avis (NASDAQ:CAR), United Healthcare (NYSE:UNH), and Accenture (NYSE:ACN).