Wednesday Options Recap

Includes: C, CGA, NVDA, S
by: Frederic Ruffy


Stock market averages are holding gains with help from better-than-expected economic news Wednesday. Data released from ADP early showed the US economy adding 297,000 jobs last month, which was almost 3X more than expected. The strong number holds some sway because it comes two days before the Labor Department releases its monthly jobs report. Separate data released later Wednesday showed the ISM Services Index up to 57.1 in December, its best levels since 2006 and also better than the 55.7 reading that economists had expected. Overall market action was sluggish in morning trading despite the strong data, but stocks had moved broadly higher late in the day. Heading into the final hour, the Dow Jones Industrial Average is up 38 points and the NASDAQ has added 18. The CBOE Volatility Index (.VIX) lost .44 to 16.94. Trading in the options market is active, with 15.8 million calls and 5.6 million puts traded so far.

Bullish Flow

The top options trades so far today are in Citi (NYSE:C) after the Feb 5 – 5.5 call spread trades at 13 cents, 50000X. Looks buyer-initiated. Another noteworthy trade is a combo — the investor sold 20,000 Feb 4.5 puts at 8 cents to buy 15,000 Jan 5 calls at 11 cents. Looks like they did it twice. These investors seem to be anticipating additional short-term gains in Citi shares. The stock is up 4 cents to $4.94 today, now up more than 20 percent since late-November.

Nvidia (NASDAQ:NVDA) shares add $1 to $16.77 and today's call volume is impressive after Barclay's upgraded the stock to Overweight. 112,000 contracts traded so far. The top trade is a Jan 15 - 16 call spread sold at 79 cents, 13400X. This spread has traded multiple times and volume in both contracts is more than 25,000. It likely closes or rolls a position, as both contracts are now in-the-money and open interest is sufficient to cover. The Mar 15 - Jan12 20 call spread traded 5100X and the Jan 15 - Feb 16 call spread, 4500X. Both appear to be rolling of bullish positions up strikes and out to later months. Shares of the chipmaker have now rallied 57.8 percent during the past three months.

Bearish Flow

Sprint (NYSE:S) adds 12 cents to $4.57 and a block of 14,839 Jan 5 calls trades on the 3-cent bid. 25,261 have changed hands and, like yesterday, this appears to be liquidating of bullish trades. Open interest in the Jan 5 calls declined by 20,129 following yesterday’s activity, but at 264,514, is still the largest position in the Sprint.

Implied Volatility Mover

China Green Agricultural (NYSE:CGA) shares are down and implied volatility is up after J Capital said the stock is not worth more than $2.85 per share. The firm says the company has “significantly” over-stated earnings and revenues — per Fly on the Wall. The stock is off 83 cents to $8.22. Most of the options action is in the January puts. The top trade is 118 Jan 7s at 60 cents when the market was 45 – 60 cents. 2046 traded. Jan 8s are the most actives. 3777 have changed hands. Meanwhile, implied volatility surged 57 percent to 128.