Friday Options Recap

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 |  Includes: ABB, AIQUF, ATLS, DISH, F, LBTYA, MON, MOS, TIVO, VVUS, XLY
by: Frederic Ruffy

Sentiment

Stocks are finishing up a bullish week with modest gains Friday. It’s been a slow news day and not much new information to guide the market one way or the other. After a three-day 453-point rally, the Dow Jones Industrial Average opened higher heading into the only economic stat of the day. A report on wholesale inventories, released at 10:00 eastern time, showed an uptick of .5 percent for May. The data proved to be a non-event and trading is now slowing ahead of the summer weekend. The Dow Jones Industrial Average is up 49 points and heading to session highs. With forty-five minutes left to trade, the CBOE Volatility Index (.VIX) is down .86 to 24.85. Options volume reflects this week’s bullish sentiment, with 4 million puts and 5.5 million calls traded across the options exchanges so far.

Bullish Flow

Massive prints in Ford Motor (NYSE:F) Friday morning. Shares are up 16 cents to $10.78 and one player bought 150K Sep 12 calls. They also sold 75K Sep 14 calls and sold 75K Sep 15 calls. They paid 68 cents for the spread. Looks like a new position (although the 14s might close) and a bet that the automaker’s shares will climb towards $14 through the September expiration. Earnings due out late July, early August.

TiVo (NASDAQ:TIVO) is up 17 cents to $7.90 and 11K calls traded in the name on talk the en banc review between TIVO vs. Dish (NASDAQ:DISH) might be cancelled. TIVO shares plummeted 41.6 percent on May 14 on news an appeals court had granted the en banc hearing to reconsider the long-running patent case between the two companies. Today’s chatter seems to have sparked some interest in TIVO calls, as 3630 July 8, 3394 July 9, and 2790 Aug 9s have traded so far. Meanwhile, implied volatility is up 18 percent to 79.

Bearish Flow

Select Sector Discretionary Fund (NYSEARCA:XLY) is up a dime to $30.22 and 32K puts traded on the ETF today. The action includes a morning buyer of 4500 Sep 25 – 30 put spreads at $1.19, 4500X on CBOE. It was tied to 158K shares at $30.10. Looks like the spread was repeated more than once. The 30s have traded 16330X and the 25s 11700X. XLY holds consumer-related names from the S&P 500 and the top holdings are McDonald’s, Disney and Home Depot. Today’s put and spread buyers are probably hedging themselves from the risk of losses in the group during the third quarter. Shares are up 4 percent this week and trying to rebound from a 19.5 percent loss sustained since late April. Implied volatility in XLY options is flat today at 27.5, compared to a 52-week hign and low of 41 and 16.5.

Implied Volatility Mover

Options action is picking up in Vivus (NASDAQ:VVUS) ahead of the FDA staff review for obesity drug Qnexa Monday, July 12 and an FDA outside panel review on July 15. Implied volatility is down a bit today, off about 13 percent, but remains elevated at 228 ahead of the news. VVUS now down 9 cents to $11.60 and 67K options traded on the day, or 3.5X the recent average daily. The activity is split almost evenly down the middle of the options chain and more than 90 percent has been in the front-month July options. Volume is being seen in strike prices ranging from 2.5 to 25, as players jockey for position ahead of the news.

Unusual Volume Movers

Monsanto (NYSE:MON) options volume is running 2.5X the average daily, with 50,000 contracts traded and call volume representing 67 percent of the total volume.

Liberty Global (NASDAQ:LBTYA) options volume is 147X the recent average levels, with 42,000 contracts traded and call volume accounting for 50 percent of the volume.

Airgas (ARG) options volume is 5X the average daily, with 39,000 traded and call volume representing 64 percent of the activity.

Unusual volume is also being seen in Mosaic (NYSE:MOS), US Airways (LCC), and ABB Ltd. (NYSE:ABB).