Tuesday Options Recap

by: Frederic Ruffy


Stocks are trading mixed late-Tuesday. Major averages slipped at the open on disappointing earnings news from a number of large caps including Texas Instruments (NYSE:TXN), US Steel (NYSE:X), and Bristol Myers (NYSE:BMY). However, the morning decline was short-lived after data released at 10:00 Eastern Time showed the Conference Board’s consumer confidence index up to 50.2 in October, from 48.6 the month before and ahead of economist estimates of 49. From that point forward, trading has been relatively slow and the Dow Jones Industrial Average is off 2 points heading into the final hour. The NASDAQ added 7.2. The CBOE Volatility Index (.VIX) is up .96 to 20.81 ahead of durable goods and new homes sales data tomorrow. Trading in the options market is running about the typical levels. 6.8 million calls and 4.6 million puts traded so far.

Bullish Flow

Garmin (NASDAQ:GRMN) adds 68 cents to $32.73 through midday and bullish flow is detected in the options, with more than 6000 calls traded, or 4X the recent average daily call volume in the name. The focus is on Nov 35 and 36 calls, with 4140 and 1110 traded, respectively, and about 60 percent trading at the Ask. Implied volatility is flat at 32.5. MKM is also out with positive comments today, reiterating that investors buy GRMN following news that the company is terminating a collaboration agreement with Asus.

Big print in Gerdau (NYSE:GGB) after one strategist sells 10K Jun $10 puts at 62 cents per contract. The trade, which looks opening, was tied to 230K shares at $12.22 and comes after a 17.4 percent slide in shares since 9/13. The Brazilian steel maker is expected to report earnings around Nov 5.

Bearish Flow

Commscope (CTV), which rallied 30.5 percent yesterday on reports Carlyle Group is in talks to buy the company for $3 billion (Reuters), is off 20 cents to $29.96. Options volume is 27X the average daily, and being driven by a Nov 28 – Jan 32 bearish risk-reversal, 10000X in midday trading. They bought puts and sold calls at 19 cents, 7500X, and 18 cents, 2500X. The trade might be to hedge shares and protect recent gains after yesterday’s run higher.

Implied Volatility Mover

Avanir Pharmaceuticals (NASDAQ:AVNR) implied volatility is elevated and options are actively traded ahead of an October 30 PDUFA date for AVP-923, which is a treatment for a neurological disorder called pseudobulbar affect. Shares are off 17 cents to $2.82 and one noteworthy trade today is a Nov 3 – 5 – 6 unbalanced call fly, 3000X. The same strategist also bought 2000 Nov 2.5 puts and 3000 Nov 2 puts, and are now positioned for a substantial move higher or lower in AVNR. Indeed, a big move is expected as implied volatility is up 2 percent to 342 late Tuesday.