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Sentiment

Stocks are holding modest gains on another slow news day Tuesday. With no economic data of importance until Thursday’s claims data, the focus is on events overseas and stock news. Trading on Wall Street was off to a sluggish early start after China announced its second rate hike in six months. However, trading was steady at the open and the Dow Jones Industrial Average had moved to positive territory into midday with help from McDonald’s (NYSE:MCD). Shares are up 3 percent and one 24 Dow stocks moving higher after the fast food giant reported strong worldwide sales numbers. The industrial average is up 71 points heading into the final half hour of trading. The tech-heavy NASDAQ has added 9.5. The CBOE Volatility Index (.VIX) slipped .23 to 16.05. Overall options trading volume is light today, with 8.3 million calls and 5.5 million puts traded so far.

Bullish Flow

Microsoft (NASDAQ:MSFT) adds 2 pennies to $28.22 and Feb 29 calls are among today’s most actively traded contracts early Tuesday. 21,700 contracts have changed hands in morning action. The contract is trading for 9 cents and the total premium value is about $240K. 63 percent trading at the offer and, while open interest is sufficient to cover, some short-term speculators might be active in the name after the Seattle Times reports the company is going to shake things up at the executive level. Ballmer wants to promote product executives with strong engineering backgrounds. Citing “two people of knowledge of the decision,” the article notes that, “Changes may be announced this month, said one of the people, who declined to be named because the plans are private.” February options expire in 10 days and the Feb 29s are currently 2.8 percent out-of-the-money.

March call buying in a number of banks Tuesday morning. Bank of New York (NYSE:BK) is up 24 cents to $32.08 and 5,061 March 31 calls traded (85 percent Ask). PNC gains 75 cents to $63.50 and 3,603 Mar 60 calls traded (81 percent Ask). PNC Aug 55 and Feb 65 calls are seeing interest as well. JP Morgan (NYSE:JPM) adds 44 cents to $45.64 and 24,363 March 45 calls traded (53 percent Ask). Feb 46 and Mar 47.5 calls seeing some action as well. State Street (NYSE:STT) is trading down 12 cents to $47.20 and March 46 calls traded 5130X (75 percent Ask). UBS, which touched a new 52-week high on guidance, is up 68 cents to $19.07 and 1,858 Mar 20 calls traded (100 percent Ask). It’s not clear what is driving the action, but it’s noteworthy as a lot of the focus is on much of the activity is focused on in-the-money call options and seems to reflect optimism about the sector through mid-March.

Bearish Flow

Starwood Hotels (NYSE:HOT) is up a nickel to $62.90 and action is heating up in puts on the casino operator. The volume includes a multi-exchange sweep of 1,500 Aug 45 puts at $1.09 and was an opening customer buyer, according to ISEE data. 2,500 now traded (100 percent Ask). March 55, 57.5 and 60s are seeing interest as well. Total volume includes 7,000 puts and 1,020 calls. HOT lost 48 cents to $60.33 per share after earnings were reported on 2/3, but has managed to recover the losses and is up 4.2 percent since that time. Today's flow seems to reflect concerns about losses in the share price in the weeks/months ahead.

Implied Volatility Mover

Tesla Motors (NASDAQ:TSLA) sees a recent spike to $25 and is now trading up $1.38 to $24.45 on news the Obama administration will announce new credits for electric vehicles (unconfirmed). Options action is heating up as well, with 2,345 call and 405 puts traded. Feb 25 calls are the most actives. 1,132 traded (89 percent ask). Mar 27 calls are seeing some interest as well. Implied volatility is up 8 percent to 67. AONE and HEV are also moving on the news.

Source: Tuesday Options Recap