Monday Options Recap

Includes: AGO, AMD, MON, SVNTQ
by: Frederic Ruffy


Major averages are holding gains, but are off session highs. Stocks opened steady Monday morning after global finance ministers met over the weekend to discuss global trade and recent tensions over conflicting currency policies among member nations. While no specific steps were outlined, the group agreed to work towards balancing global trade. Then, thirty minutes into trading, the Dow Jones Industrial Average moved to session highs after data showed existing home sales improving to an annual rate of 4.53 million in September, from 4.12 million in August and better than the 4.25 million that economists had expected. Yet, after the morning run higher, the rally ran out of gas. Since then, trading has been somewhat choppy. The Dow is up 68 points and 47 points from its best levels. The NASDAQ added 18. CBOE Volatility Index (.VIX) seized .81 to 19.59. Trading in the options market is on the light side, with about 5.8 million calls and 5 million puts traded so far.

Bullish Flow

The top options trade Monday morning was in Monsanto (NYSE:MON). Shares added $2.85 to $60 and a block of 9,500 Jan 2012 $80 calls traded at $2.97 per contract on ISE. It’s an opening customer buyer, according to ISEE data. The gains in the stock and premium buying might be in reaction to an update of the company’s Genuity Roundup Ready 2 yield soybean field trial data. It showed significant yield boost over competitive Roundup Ready products.

AMD adds 27 cents to $7.16 and 23K calls traded in the chipmaker. The volume is 3X normal for midday and compares to put volume of 1,600 contracts. Nov 8 calls, which have traded 11,900x (62 percent ask), are the most actives. Nov 7 and Dec 8 calls are seeing interest as well. Implied volatility is up 7 percent to 44.5. AMD last reported earnings on Oct 14 and not much news since then. Today’s action seems to reflect expectations for gains in shares in the weeks ahead.

Bearish Flow

Savient Pharmaceuticals (OTC:SVNT) is reeling after the company said an evaluation of strategic alternatives did not result in the sale of the company at this time. The stock was halted and, after trading resumed, is off $10.18 to $11.52. About 12K puts and 6400 calls traded on the ticker. The top trade is a block of 1500 Nov 19 puts apparently bought at $1.20 before the news. The contract is now bid at $7.05. Nov 20 and 18 puts also saw interest this morning. Implied volatility is now up about 19 percent to 99.5.

Implied Volatility Mover

Assured Guaranty (NYSE:AGO) shares are off $2 to $19.28 and implied volatility is up 19.5 percent to 68 after S&P stripped the company of its triple A credit rating. It assigned the bond insurance company with an AA-plus rating. A couple of firms, including Piper Jaffray, are out defending the stock this morning. Meanwhile, 11K calls and 4535 puts traded in the name, including apparent Nov 20 – 23 call spread buyers on ISE. The top is 2000 at 95 cents. More than 4000 traded. Nov 17, 18 and 19 puts are busy as well. Attention shifts next to the company’s earnings, due around Nov 10.