Friday Options Recap

by: Frederic Ruffy


Stocks are rallying following gain in Europe and better-than-expected durable goods data Friday. Stocks traded broadly higher across the euro-zone before the opening bell on Wall Street on positive German business confidence data. France’s CAC 40 Index paced the advance with a 1.9 percent rally. In the US, the focus turned to Durable Goods data, which showed a decline of 1.4 percent, and not as bad as the 1.4 percent drop that economists had feared. Excluding transports, orders rose 2 percent and much better than the .6 percent increase that economists had predicted. This week’s last economic stat showed New Home Sales at an annual rate of 288K in August, unchanged from July and in-line with expectations. The Dow Jones Industrial Average is rallying on the Durable Goods report and diminishing concerns about problems in the euro-zone. Heading into the final hour, the Dow is up 185 points. The NASDAQ gained 48. The CBOE Volatility Index (.VIX) fell 2.06 to 21.81. Trading in the options market is brisk, with about 6.6 million calls and 4.9 million puts traded so far.

Bullish Flow (NASDAQ:AMZN) shares notched a new 52-week high and are up $7.57 to $160.42 after JP Morgan raised their price target on the online retailer to $198 from $154. The firm says Amazon is gaining market share in eCommerce. In the options market, trading is brisk as well. 65,000 calls and 62,000 puts traded in so far. No big trades to report, however. The largest is a 500 lot of Jan 170 puts at $20.25, possibly a put writer looking for a move beyond $170 by Jan 2011 or willing to get assigned on those puts. Implied volatility in AMZN is up 5 percent to 40 today, roughly midway between a 52-week high and low of 55 and 27.

CSX Corp. (NASDAQ:CSX) is up $1.34 to $55.73, even after BB&T downgraded shares of the railroad company to Neutral from Buy. Meanwhile, noteworthy options action today is a buyer of 7,160 Oct 60 calls at 28 cents each. 7,320 traded. Another 1094 Oct 57.5 and 410 Nov 57.5 calls traded (96 percent Ask.) Some of the action might be closing, as open interest is sufficient to cover in all three contracts. Meanwhile, implied volatility is down 3 percent to 31.

Bearish Flow

KB Homes (NYSE:KBH) adds 44 cents to $12.15 after reporting a quarterly loss of 2 cents per share, which was 13 cents better than Street estimates. A noteworthy options trade in the builder on the heels of the report is an Oct 12 - 14 (2X1) put ratio spread at 48 cents, 1200X on CBOE. It might be a roll or closing, as open interest is sufficient to cover. Or, it might be a bearish short-term bet after the company's CEO also said that the supply of homes is slowly growing and he sees no significant improvement in housing until the economy is on stronger ground.

Implied Volatility Mover

Seattle Genetics (NASDAQ:SGEN) adds 40 cents to $12.15 and options volume is 11X the average daily, driven by Oct 10 - Nov 15 bearish risk-reversals. 3000 traded this morning at 25 cents on ISE and sentiment data confirm the puts were bought, not the calls. 3000 more traded about 7 minutes ago. No news on the stock today. Shares traded lower on Sep 13 after clinical trials of SGN-33 didn't meet primary endpoints. Phase 2 trial evaluating SGN-35 still expected, possibly before the Oct expiration. Implied volatility is up 5 percent to 111.

Unusual Volume Movers

Bullish flow detected in Mellanox Technologies (NASDAQ:MLNX), with 8714 calls trading, or 15x the recent avg daily call volume in the name.

Bullish flow detected in Satyam Computer Services (SAY), with 10971 calls trading, or 7x the recent avg daily call volume in the name.

Bullish flow detected in Amkor Technology (NASDAQ:AMKR), with 5042 calls trading, or 19x the recent avg daily call volume in the name.

Increasing options volume is also being seen in EMC (NYSE:EMC), Archer Daniels Midland (NYSE:ADM) and Nvidia (NASDAQ:NVDA).