Thursday Options Recap

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 |  Includes: CLNE, EEM, MGM, SLXP
by: Frederic Ruffy

Sentiment

Stock market averages are rebounding from morning losses and action has turned mixed late-Thursday. Attention was squarely on oil prices early after WTI crude captured the $100 per barrel level. Although OPEC has ample supply to offset the shortfall from troubles in Libya, the concern is that spreading unrest will disrupt oil production in bigger producing countries like Saudi Arabia. Yet, after the early rally to $103.41, crude oil saw a volatile reversal and is now trading down $1.18 to $96.90 a barrel. Meanwhile, the day’s economic news was mixed. Early data showed Durable Goods up 2.7 percent in January, which was in-line with expectations. Jobless claims fell to 391K last week, which was better than the 410K that was expected. However, a separate report released later showed January New Home Sales at an annual rate of 284,000, and significantly less than the 310,000 that was expected. Yet, at the end of the day, the data didn’t matter too much as the equity market seems to be taking its cue from action in the oil pits. The Dow Jones Industrial Average is down 10 points and 110 points off session lows. The tech-heavy NASDAQ has added 21. The CBOE Volatility Index (.VIX) is under pressure in the final hour, now down 1.23 to 20.90. Volume in the options market includes 9 million calls and 8.3 million puts.

Bullish Flow

MGM adds 13 cents to $13.62 and 27,000 calls traded on the casino-operator today, which is not unusual volume, but compares to put volume of 8,550 contracts. March 13 calls are the most actives. 4,900 traded and 82 percent of the volume at the Ask. Looks like some of the volume in March 14, March 15 and April 15s is being driven by upside call buyers. Implied volatility is up 2 percent to 47.5. Moody's says today that it is seeing signs of modest recovery in the Las Vegas strip area.

Clean Energy Fuels (NASDAQ:CLNE), which saw action Tuesday on news UPS has contracted the company, is up another $1.15 to $14.92 on news Knapheide, a maker of steel truck bodies, has selected the company for CMG fuel systems for Ford light duty trucks. CLNE call options are busy again today, led by a block of 2827 Jun 16 calls at $1.10 when the market was 95 cents to $1.25. Looks opening. More than 4000 traded. Mar and Sep 15 and 16 calls are seeing interest as well.

Bearish Flow

iShares Emerging Markets Fund (NYSEARCA:EEM) is flat at $44.87 and 23,000 EEM Jun 43 puts were recently sold at $1.84 each. Another 35,000 were sold earlier at $1.90 per contract. One or more investors might be unwinding hedges. Volume in the June 43 put, which is 4.2 percent out-of-the-money, is now 71,425 vs. 106,365. Implied volatility in the EEM was up 24 percent over the past two days and is down 2 percent to 25.5 midday Thursday.

Implied Volatility Mover

Salix Pharmaceuticals (NASDAQ:SLXP) is down 22.3 percent to $32.21 and options volume is running 8.5X the average daily after the FDA decided the company’s Xifaxan (label expansion) is not ready for approval. March 37 puts are the most actives, as some players might be liquidating positions opened prior to the news. Mar 35 calls, Mar 35 puts, Mar 30 puts, April 40 calls and July 37 calls are seeing interest as well. Implied volatility is down 42 percent to 50.5.