Monday Options Recap

|
 |  Includes: AA, C, CAT, DELL, GE, MMM, ORCL, VIAV
by: Frederic Ruffy

Sentiment

Stock market averages are higher on a slow news day Monday. With no economic data or earnings of significance, merger and acquisition activity was in focus early after GE made a $1.3 billion bid for Wellstream and DELL confirmed its interest in acquiring Compellent Tech for $960 million. Optimism that a compromise on tax cuts will be reached in Washington seems to be bolstering sentiment on Wall Street as well. The Dow Jones Industrial Average is trading 62 points higher with help from some cyclical names like Caterpillar (NYSE:CAT), 3M (NYSE:MMM) and Alcoa (NYSE:AA). However, the tech-heavy NASDAQ added just 1 point. With less than an hour to trade, the CBOE Volatility Index (.VIX) is down .61 to 17.00. The day’s options order flow mirrors the optimism that has resurfaced on Wall Street in December. 7.5 million calls and 4.6 million puts traded so far.

Bullish Flow

Oracle (NASDAQ:ORCL) adds 61 cents to $30.55 and options action is brisk today. 70K calls and 17K puts traded. 63 percent of the volume is in the December options and therefore the action is probably related to a Dec 16 earnings release. RBC Capital analysts said that, based on their channel checks, the software maker should have strong quarter. The stock is near session highs and has now rallied nearly 13 percent month-to-date. Dec 30 calls are the most actives. More than 20K traded (55 percent ask). Dec 31 calls and 30 puts are seeing brisk trading as well. Implied volatility is moving up 4 percent to 27 ahead of the news.

Bearish Flow

Citi (NYSE:C) adds a penny to $4.79 and a noteworthy trade early is 50000 Jan 5 calls sold at 14 cents each. It might be a closing trade. Open interest is 2.42 million and currently the largest OI position in the listed options market today.

Implied Volatility Mover

JDS Uniphase (JDSU) gapped at the open, touched a new 52-week high, and is up 68 cents to $14.10 after Piper Jaffray upgraded the stock to Outperform and raised its price target to $17. Options action is heating up as well. 7,050 calls and 1,385 puts traded so far. The Jan 15 calls are the most actives. 1,495 traded (52 percent ask). Dec 11, Jan 14, and Mar 13 calls are seeing interest as well. Meanwhile, implied volatility is up 5.5 percent to 36.5.