Thursday Options Recap

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Includes: FFIV, V, WMB, WMT, YGE
by: Frederic Ruffy

Sentiment

Major averages are sporting modest losses, but are well off session lows heading into the final hour of trading Thursday. A barrage of economic data was in focus early. Weekly jobless claims for Jan 15, 2011 declined by 37,000 to 404,000. Economists were looking for a drop to 425,000. Existing Homes Sales improved to 5.28 million in December, from 4.7 million in November and ahead of expectations (of 4.8 million). The List of Leading Economic Indicators rose 1 percent last month and .4 percent more than expected. The Philly Fed manufacturing Survey was the only disappointment, falling to 19.3 in January (vs. 20.0 estimates). Meanwhile, the tech sector is being weighed down by losses in the cloud/networking space after F5 (NASDAQ:FFIV) missed on earnings. Commodity-related names are broadly lower along with metals and energies (except natural gas). Bonds falls and the yield on the ten-year recaptured 3.45 percent. However, gains in the retailers, including Dow components Home Depot (NYSE:HD) and Wal-mart (NYSE:WMT), are helping. BofA (NYSE:BAC) is also higher ahead of earnings, Friday morning. Dow component GE is slated to report on options-expiration Friday as well. The Dow Jones Industrial Average is now 5 points and 75 from session lows. The tech-heavy NASDAQ lost 19. The CBOE Volatility Index (.VIX) added .55 to 17.86. Trading is active due to the upcoming expiration, with 10.6 million calls and 9.2 million puts traded so far.

Bullish Flow

66000 calls and 33000 puts traded in Visa (NYSE:V). Shares, which traded as low as $67.51 early, rallied in the second half of trading and are up $2.16 to $71.28. The run higher is apparently related to developments in debit card interchange rate regulation. In options action, players are trying to swipe short-term profits in the Jan 70 and 75 calls, which have traded 15600 and 10700, respectively. Feb 65 puts, 67.5 puts and 75 calls are seeing increasing action as well. Implied volatility in Visa is 10 percent to 32. Earnings slated for Feb 2 (after market).

Bearish Flow

It looks like some investors are taking out some disaster insurance in Yingli Green Energy (NYSE:YGE). Shares are off 13 cents to $11.22 and the focus is on the June 6 puts, which have traded 4600X. The top trade is 500 at 15 cents on the ISE and an opening buyer, according to ISEE data. 4,200 puts total, or 98 percent of the volume in YGE on the ISE, are opening buyers. Implied volatility is up 4.5 percent to 47.5. No news on the stock. Next earnings due early-March.

Williams Companies (NYSE:WMB) loses 6 cents to $25.97 and showing some resilience after natural gas prices rose 9 cents to $4.65 on the heels of today’s weekly inventory data. In options action, a noteworthy trade in WMB is a buyer of 30000 Feb 28 calls at $40 cents each. The position is tied to shares $25.96 (26 delta). It might be offsetting, as open interest is 70.8K. Today’s trades also includes a seller of 4,500 Jan 21 calls at $5.03 and probably a closing trade ahead of the expiration. Another interesting spread is a seller of Feb 22 puts at 40 cents for a Feb 25 synthetic, 5000X.

Implied Volatility Mover

The Qs lose 38 cents to $56.13 and QQQQ Feb 56 puts are the most actives early Thursday. The volume includes a buyer of 38000 contract at $1.04 per each. 54,760 now traded vs. 90,707 in existing open interest. After notching a new 52-week high Tuesday, the tech-heavy QQQQ is down 1.8 percent during the past two days, weighed down by mixed earnings news and profit-taking. Shares of the exchange-traded fund are up 9.3 percent since mid-November. Meanwhile, implied volatility in the Qs, as measured by the QQV Index, is .64 to 16.91.