Tuesday Options Recap

by: Frederic Ruffy


Stocks are broadly lower amid escalating tensions in Korea and ongoing worries about the European Debt Crisis. Markets traded broadly lower across Asia after North and South Korea exchanged artillery fire. Meanwhile, in Europe, ongoing worry about deepening debt problems has the euro falling back towards 1.33, from about 1.355 late-Monday. European equity markets also suffered steep losses Tuesday, which set a negative tone for early trading on Wall Street. The Dow Jones Industrial Average opened lower and hasn’t covered. With about an hour left to trade, the Dow is down 170 points. The NASDAQ lost 41. The CBOE Volatility Index (.VIX) seized 2.71 to 21.08. Trading is brisk, with about 5.8 million calls and 5.2 million puts on the tape so far.

Bullish Flow

Alpha Natural Resources (ANR), which rallied 8.1 percent Friday on reports the company is seeking to expand its metallurgical coal holdings (Bloomberg), is down $1.05 to $50.49 midday Tuesday. Meanwhile, 10,370 March 55 calls traded. The top trade is 1500 at $3.60 when the market was $3.40 to $3.60. In all, 79 percent traded at the ask and, with open interest of just 221 contracts, it looks like call buyers are opening new bullish positions in ANR. Jan 49 puts and Jan 52.5 calls are seeing interest as well. Implied volatility is up 2.5 percent to 47.

Bearish Flow

AMR loses 17 cents to $8.05 and options on the airliner are busy today. Dec 7 and 9 calls were active this morning on takeover chatter, according to Briefing. Recent trades include a buyer of 7550 Jan 7.5 puts at the 50-cent asking price. It was bought and tied to shares (33 delta), according to a source on the floor. 11,140 now traded. Implied volatility in AMR is up 8 percent to 54. Delta puts were actively traded yesterday. Some players might be taking positions in anticipation of increased volatility heading into the busiest period for US travel. Things might get dicey at some of the major airports due to the recent furor over TSA security procedures, which now include full body scans and uncomfortable law enforcement-type pat downs. According to the Associated Press, “A loosely organized Internet campaign is urging people to refuse the scans on Wednesday in what is being called National Opt-Out Day.”

Implied Volatility Mover

Nuance (NASDAQ:NUAN) adds 71 cents to $17.82 and 16,000 calls traded on the Burlington, MA application software developer. Shares hit a morning high of $19.19 after the company released earnings after the close of trading yesterday. The stock is also in the spotlight after TechCrunch published a piece this morning dispelling the idea that Apple Computer (NASDAQ:AAPL) is acquiring NUAN. The TechCrunch story was in response to recent comments from Apple co-founder Steve Wozniak, who in a video interview last night apparently incorrectly mentioned that Apple “recently bought the company Nuance.” In any event, NUAN is off session highs and options action is brisk. December 15, 17, 19, 20 and 21 calls are the most actives. Implied volatility is up about 15 percent to 47.