Tuesday Options Recap

 |  Includes: DIS, GOOG, LVS, MSI, XLB
by: Frederic Ruffy


Stocks are trading mixed late Tuesday. The table was set for morning gains on Wall Street after Japan’s Nikkei gained 1.7 percent and UK’s FTSE jumped 1.9 percent. Gains overseas set a positive tone for morning trading and into a report on Factory Orders at 10:00 am eastern time, which showed an uptick of .7 percent for November. Economists were looking for a drop of .3 percent. Yet, the major averages didn’t react to the data and, instead, had fallen into the red by midday. Minutes from the latest FOMC meeting came into focus Tuesday afternoon, but didn’t hold any surprises. Easy policy action is set to continue. The major averages are now off session lows and the Dow Jones Industrial Average is up 5 points heading into the final hour. The tech-heavy NASDAQ lost 13. The CBOE Volatility Index (.VIX) made a stab above 18, but is now up .05 to 17.66. Options volume is respectable, with 9.2 million calls and 5.8 million puts traded so far.

Bullish Flow

Motorola Solutions (NYSE:MSI) options are active on their first day of trading. MSI is one of two publicly traded companies that emerged from Motorola’s spin-off into different units. Motorola Mobility (NYSE:MMI) includes smart phone and set-top boxes. MMI is up $1.53 to $32.95. Motorola Solutions consists of bar code scanners and two-way radios. MSI is up 7 cents to $37.55. Meanwhile, MOT options have been adjusted and Jan $9 calls are the most actives and have traded 5,325X. 10,000 calls and 1,000 puts now traded. (Settlement calculated on .14 X MSI + .12 X MMI + a bit of cash).

Disney (NYSE:DIS) notches a new 52-week high and is one of 17 Dow stocks moving higher through midday Tuesday. Shares are up 69 cents to $38.51 and 12,000 calls have traded on the media giant. The activity represents 12X the typical activity and compares to put volume of 2,545 contracts. The top trade is a block of 2,572 Jan 38 calls at 86 cents on ISE and an opening customer buyer, according to ISEE data. 3,983 traded (89 percent ask). Another 3,824 Jan 39s changed hands (70 percent ask). No news on the stock today and the action seems to reflect expectations for additional gains in Disney shares over the next two and a half weeks. January options expire in 17 days.

Bearish Flow

Las Vegas Sands (NYSE:LVS) adds $1.72 to $47.31 and is running to session highs after a block of 4.17 million shares recently traded at $46.89. Most of the options action was earlier in the day and included March 45 – 47 call spreads sold at 97 cents and $1. 30000X total and might be closing activity, as open interest in both contracts is more than 57K. The same spread was being bought in early-November at $1.15.

Implied Volatility Mover

Basic Materials Select Sector Fund (NYSEARCA:XLB) loses 50 cents to $38.22 and options volume is 3X the average daily, with 21,000 puts and 8,425 calls traded so far. The top trade is Jun 34 – 41 strangle sold at $2.76, 3000X. Today’s trades also includes a sweep of 1,810 Jun 34 puts on the $1.35 bid and 1378 Jun 38 puts on the $2.76 bid, which look like opening premium sales. Implied volatility is up 9 percent to 25 despite today’s selling in XLB options, as shares slump on a rough day for the material sector.