Friday Options Recap

by: Frederic Ruffy


Stocks overcame a disappointing GDP report and early weakness to trade mixed late Friday. Volatility picked up a bit early in the trading session after data showed second quarter GDP at a 2.4 percent annual rate. Economists were expecting 2.5 percent growth. However, stocks found a floor early with help from better-than-expected manufacturing and consumer sentiment data. The first report, released 15 minutes into trading, showed the Chicago PMI up to 62.3 in July, up from 59.1 the month before and better than the 56.3 that economists had expected. 10 minutes later, the University of Michigan Final Sentiment Index was at 67.8, and a bit better than the 67.5 that economists had expected. The major averages battled back and were mixed into midday. From there, action slowed. With 45 minutes left to trade, the Dow Jones Industrial Average is down 2 points and 127 points off session lows. The Nasdaq is up 6. The CBOE Volatility Index (.VIX) is down .11 to 24.02. Volume is on the light side, with 3.6 million puts and 4.3 million calls traded so far.

Bullish Flow

Rambus (NASDAQ:RMBS) sees a spike to $19.60 on increasing volume on renewed litigation settlement speculation. Shares are now up 17 cents to $19.51 and 5,100 call options traded on the chipmaker, or 3X the expected and 5X the number of puts. Short-term speculators are focused on the Aug 21 and 22 calls, with 1675 and 900 traded, respectively. Implied volatility is up 4 pecent to 52. Shares rallied to a high of $21.69 Tuesday on news the company won a patent ruling vs. NVidia. Gains didn’t hold, however. Shares are down 9.7 percent from those highs. RMBS is also facing a rehearing in patent matters related to Micron and Hynix, scheduled for October 7, 2010.

eBay (NASDAQ:EBAY) is flat at $20.77 and a block of 7500 Jan $25 calls was bought at 56 cents per contract. It was tied to 150K shares at $20.70 and might be a closing trade, as open interest is more than 28K. Implied volatility in EBAY is not much changed today, at 32.5, compared to a 52-week hgh and low of 47 and 27. The online auctioneer reported earnings on July 21. Shares are up 2.6 percent since that time.

Bearish Flow

Top options trade so far today in a rather quiet trading session Friday is a block of 17,847 Sep 15 puts on the iShares Silver Fund (NYSEARCA:SLV). It traded at the 13-cent Ask price and looks like an opening buyer. 30K now traded vs. 3583 in open interest. The metals are having a bullish day and silver is up 49 cents to $18.11. Consequently, SLV is up 44 cents to $17.68 and the Sep 15 puts are 15.2 percent out-of-the-money. A total of 46K puts and 23K calls now traded in the ETF, or about double the expected for midday.

Implied Volatility Movers

Deere (NYSE:DE) shares are up $2.10 to $66.60, a new 52-week high, and option volume is 3x the daily average driving a Sep. 65 - 67.5 strangle, which traded 3,710 contracts on ISE at $5.09. ISEE sentiment data indicate that both legs are opening customer buyers and therefore a volatility play on the farm equipment and machine maker. It might be a play on earnings, due Aug 18. Shares are up and implied volatility down about 2.5 percent to 34 today, as corn, wheat and soybeans all see sharp rallies Friday.

Unusual Volume Movers

Bearish activity detected in Finisar (NASDAQ:FNSR), with 2554 puts trading, or 4x the recent average daily put volume in the name.

Bearish activity detected in Enbridge Energy Partners (NYSE:EEP), with 2243 puts trading, or 7x the recent average daily put volume in the name.

Bearish activity detected in Childrens Place Retail Stores (NASDAQ:PLCE), with 2444 puts trading, or 18x the recent average daily put volume in the name.

Increasing volume is also being seen in Genzyme (GENZ), Arena Pharmaceuticals (NASDAQ:ARNA), and First Solar (NASDAQ:FSLR).