Tuesday Options Recap

Includes: BHP, GCI, IPI, MOS, POT, PTV
by: Frederic Ruffy


Stocks are broadly higher, as investors seemed to look beyond another round of mixed economic data and focus on the day’s stock news instead. Home Depot (NYSE:HD) and Wal-mart (NYSE:WMT) are both helping the Dow Jones Industrial Average on better-than-expected earnings. Meanwhile, mergers were announced after BHP (NYSE:BHP) made a bid for Potash (NYSE:POT) and Reynolds said it wants to buy Pactiv (PTV). The day’s economic news was mixed, however, the latest housing starts fell short of economist estimates, increasing to an annual rate of 546K in July. Economists were looking for 555K. The July PPI was in-line at .2 percent. Meanwhile, industrial production showed an increase of 1 percent last month, which was better than the .6 percent predicted by economists. At the end of the day, it seems that the economic data took a backseat to earnings and merger news. With an hour left to trade, the Dow Jones Industrial Average is up 155 points and the NASDAQ added 35. Options trading is brisk, with about 6.4 million calls and 4.9 million puts traded so far.

Bullish Flow

Intrepid Potash (NYSE:IPI) is up $1.49 to $25.45 and rallying along with its peer, Potash (POT), after BHP Billiton made a $39 billion takeover offer for POT. The deal, which Potash has rejected, would be the largest of the year. The news sparked a flurry of activity in Potash, Mosaic (NYSE:MOS), and Intrepid Potash. While there appears to be two-way action in MOS and POT, the flow in IPI seems to be leaning on the bullish side. Sep 25 puts are the most actives, with 3054 and 100 percent traded on the bid. Meanwhile, buyers seem to be dominating the action in IPI Aug 26, Sep 27 and Sep 28 calls. Implied volatility is up 9.5 percent to 46.5.

Bearish Flow

Gannett (NYSE:GCI), which prior to today had suffered a four-month 30.5 percent drop, is up 18 cents to $12.78. Meanwhile, options volume is running 8X the average daily, being driven by buyers of Oct 12 puts. More than 12K traded (67 percent ask) vs. 2,481 in open interest. Implied volatility in the McLean, VA newspaper company is creeping up 2 percent to 53.5.

Implied Volatility Mover

Pactiv (PTV) is up $1.69 to $32.61 and 6,500 calls already traded in the name after the company agreed to be acquired for $33.25 per share in cash by Reynolds Group Holding Limited. Feb 30 calls are the most actives, with some investors possibly liquidating positions on the news. 4,400 traded (69 percent bid) and implied volatility is down about 35 percent to 20. PTV had been the subject of takeover chatter as recently as Aug 4. On July 23, the New York Post reported that Koch Industries might be interested in the Lake Forest, Ill. packaging and container company.