Friday Options Recap

by: Frederic Ruffy


Investors brushed aside disappointing jobs data and stock market averages are higher late Friday. Trading was sloppy in morning action after the Labor Department reported that the US economy lost 94,000 jobs in September and the unemployment rate remained unchanged at 9.6 percent. Economists were looking for a modest increase in payrolls and an unemployment rate of 9.7 percent. Yet, with help from rallying commodities prices and a positive earnings report from Alcoa (NYSE:AA), the Dow Jones Industrial Average is up 60 points heading into the final hour. The NASDAQ added 16. The CBOE Volatility Index (.VIX) is down .91 to 20.65. Trading in the options market is slowing a bit, with about 6.5 million calls and 5.4 million puts traded so far.

Bullish Flow

TiVo (NASDAQ:TIVO) shares lost 2 cents to $10.28 and 12K calls traded in the name on renewed speculation of a settlement with Dish Network (NASDAQ:DISH), yet again. It's unsubstantiated, but it might be the motivation behind the active trading in TIVO Oct and Nov 9, 10 and 11 calls today. The top trades of the day are part of a longer-term spread, however, after an investor bought the May $12 - Jan12 $22.5 call spread at $1.65, 1276X on ISE. The spread traded 2600X total (looks opening) and seems to be a bet that shares will move beyond $12 by the May expiration, but not beyond $22.5 by January 2012.

Halliburton (NYSE:HAL) is rallying, up $1.10 to $34.72, and 8100 calls traded in the oil driller so far. The call volume represents 3X the expected and compares to 2,540 puts. Nov 34 calls are the most actives. 3,390 traded (89 percent Ask). Similar action seen in Oct 35 and Jan 40 calls. Implied volatility is off 2.5 percent to 36.5 and the bullish trading comes ahead of an Oct 18, before market, earnings release. No news on the ticker today. Crude oil added $1.21 to $82.88 a barrel.

Bearish Flow

The top options trade today is in SPDR Gold Trust (NYSEARCA:GLD). Shares added 84 cents to $131.21 and a block of 38,000 Dec 100 puts traded on the 12 cent bid. It was part of a ratio spread, in which the investor bought 20,000 December 118 puts at 73 cents and sold 40,000 December 100 puts at 12 cents, opening a bearish 1X2 put ratio spread for a net debit of 49 cents. GLD is up another 2.1 percent this week amid rallying gold prices. The ETF is up 15.6 percent since late July and today's put spread might be a hedge to protect recent gains or maybe an outright bearish bet against gold. Max pay-off is at $100, or 23.8 percent below current levels, at the December expiration.

Implied Volatility Mover

Biodel (BIOD), a Danbury, CT biopharmaceutical company, lost 27 cents to $4.50 and options volume rose to 7X the average daily yesterday after one investor initiated a Mar 2.5 - 7.5 bearish risk-reversal at 35 cents, 10000X. They bought puts, sold calls to open a new positions. Implied volatility in BIOD is elevated at 225 percent, as investors await an Oct 30 PDUFA date for the company's Linjeta, a treatment for diabetes. The company presented data on the drug at a conference in Europe on 9/20. Shares moved up on the news, but are down 20.8 percent since that time. Yesterday's risk-reversal might be a shareholder initiating a 'collar' or hedge on concerns about potential volatility around the PDUFA date.

Unusual Volume Movers

Bullish flow detected in Intrepid Potash (NYSE:IPI), with 5027 calls trading, or 2x the recent average daily call volume in the name.

Bullish flow detected in China LIfe Insurance Company Limited (NYSE:LFC), with 3371 calls trading, or 3x the recent average daily call volume in the name.

Bullish flow detected in Radian Group (NYSE:RDN), with 5081 calls trading, or 4x the recent average daily call volume in the name.

Increasing options volume is also being seen in MGM (NYSE:MGM), Agrium (NYSE:AGU), and Deere (NYSE:DE).