Friday Options Recap

by: Frederic Ruffy


Stocks are trading mixed on options expiration Friday. With no earnings of importance or economic data reported today, there isn’t a lot of new information to guide the action. Caterpillar (NYSE:CAT) is up 1.7 percent and helping to keep the Dow Jones Industrial Average above water after the maker of earth moving equipment updated its sales outlook. Nineteen Dow stocks are higher, eleven are lower, and the industrial average is up 47 points heading into the final hour. However, the tech-heavy NASDAQ has lost 3.4. The CBOE volatility Index (.VIX) edged up .24 to 16.83. Trading in the options market is active due to the expiration and heading into a three-day President’s Day weekend. 8.8 million calls and 6.8 million puts traded so far.

Bullish Flow

A couple of big retailers are seeing increasing options action ahead of earnings next week. Target (NYSE:TGT) loses $1.24 to $51.91 and a block of 10,787 April 60 calls is bought at 17 cents each today. 15,733 now traded. Open interest is sufficient to cover. 31,000 calls and 13,000 puts now traded on the retailer. Implied volatility is up 4 percent to 25,as investors look to TGT next earnings due the morning of 2/24 and a profit report from Wal-mart (NYSE:WMT) next week as well.

Speaking of WMT, calls are seeing heavy pre-earnings action. 156,000 contracts traded so far, which is 9X the normal and 5.5X the day's put volume. Shares are up 64 cents to $55.39 and today's trades include a block of 47,430 March 57.5 calls at 23 cents each when the market was 21 to 23 cents. Another trade was a buyer of 10,000 March 27.5 calls at 29 cents. The March 57.5 - 60 call spread traded at 21 cents, 17400X. Consequently, volume in the Mar 57.5s is now approaching 85,000. Mar 55 and 60 calls are the next most actives. Implied volatility is up 6 percent to 18.5, as investors seem generally optimistic heading into the world's largest retailer's earnings, due Tuesday before the opening bell.

Bearish Flow

5040 puts and 230 calls traded on Gerdau (NYSE:GGB) so far today. Shares have added 18 cents to $14.68 and the focus is on the Mar 14 puts and includes a 5000 contract block at 35 cents on AMEX. Market was 25 to 40 cents and an investor might have initiated the trade as a hedge ahead of earnings, expected around Mar 3 (unconfirmed).

Implied volatility Mover

23,000 calls and 5,320 puts traded on Pan American Silver (NASDAQ:PAAS). Shares have added $1.77 to $37.17 and the top trade: an opening customer buyer of 5,059 Mar 38 calls at $1.40 on ISE, according to ISEE data. 10,500 now traded. Implied volatility is up 9 percent to 48. It’s possibly a play on silver, which is up 70 cents to $32.27 today and now up more than 20 percent since January 25.

Unusual Volume Movers

Bearish activity detected in Weight Watchers (NYSE:WTW), 12072 puts trading, or 11x the recent avg daily put volume in the name.

Bullish flow detected in Jinkosolar (NYSE:JKS), Ltd with 9502 calls trading, or 9x the recent avg daily call volume in the name.

Bullish flow detected in Medtronic (NYSE:MDT), with 17679 calls trading, or 4x the recent avg daily call volume in the name.

Increasing volume is also being seen in Brocade (NASDAQ:BRCD), iShares Silver Fund (NYSEARCA:SLV), and Valero (NYSE:VLO).