Friday Options Recap

by: Frederic Ruffy


Stock market averages are holding modest gains late Friday. The consumer was in focus early after the Commerce Department reported that Retail Sales rose 1 percent in February, which was in-line with expectations. However, a separate report released a bit later showed the University of Michigan Consumer Sentiment Index down to 68.2 in mid-March, from 77.5 in late Feb. and well below economist estimates of 76.5. Stock market averages dipped on the news, but after a 228-point loss yesterday, the Dow Jones Industrial Average was steady at midday.

Investor attention has shifted somewhat, from the European Debt Crisis and the escalating violence in NAME (North Africa, Mid-East) and to the devastating earthquake in Northeast Japan. Overall market action has been relatively quiet and the tone of trading has a wait-and-see feel to it, as investors try to make sense of the myriad of different events happening around the globe. Crude oil (April), which moved towards $107 Monday, is down $1.70 to $101. Exxon (NYSE:XOM), GE (NYSE:GE), and 3M (NYSE:MMM) are leading the Dow to a 58-point gain. The tech-heavy Nasdaq added 15. With less than 90 minutes to trade, the CBOE Volatility Index (.VIX) is down 1.70 to 20.18. Options flow reflects the cautious sentiment today, with 6.6 million calls and 6.3 million puts traded so far.

Bullish Flow

Clean Energy Fuels (NASDAQ:CLNE) opened higher on earnings news and the advance was extended midday after President Obama mentioned T Boone Pickens (Briefing). Pickens is a major shareholder (32 percent in Oct 2010). CLNE is now up $1.68 to $14.68 and today’s options volume includes 7400 calls/2800 puts, which is 3X the average daily volume for CLNE. March 13 puts and calls, which expire in one week, are the most actives. Implied volatility is down 9 percent to 53.

Cisco (NASDAQ:CSCO) touches another 52-week low today and is down 13 cents to $17.79. In options action, one investor bought the March 18 straddle at 52 cents, 11,150X. About 20 minutes later, the April 18 straddle was sold at $1.08, 11000X. The two trades might roll a position from March to April. If so, it’s possibly a bet that Cisco shares will hold around $18 through the April expiration, in 35 days.

Bearish Flow

iShares Japan Fund (NYSEARCA:EWJ) is trading down 20 cents to $10.79 early Friday after a quake struck off the coast of Sendai, which is a town of about 1 million that accounts for 8 percent of Japan’s GDP. It hit in the final hour of trading in Tokyo and sent the Nikkei skidding 100 points. The decline has been orderly, however, and EWJ is off 1.8 percent. Meanwhile, put volume in the Japan ETF is 3,900 contracts, which is 5X the expected and compares to call volume of 720. Mar 11 puts, which expire at the end of next week and have a delta of -.65, are the most actives. 1,650 traded. Mar 10, Apr 11, and Jun 10 puts are seeing interest as well. Implied volatility is up 11 percent to 21, compared to a 52-week high and low of 31.5 and 15.

Implied Volatility Mover

Star Scientic (CIGX) options are seeing another day of brisk trading, as shares add 35 cents to $2.72. CIGX has surged nearly 50 percent over the past four days. Attention is now shifting to the March and May 3 calls, which have traded 1325 and 2155X, respectively, and more than two-thirds at the offer. Mar, Apr and Aug 2.5 calls are seeing action as well. 12000 call options and 900 puts traded on the name. Implied volatility is up 30 percent to 136. The company announced today that its claims in a patent reexamination have been confirmed.

Unusual Volume Movers

Cleveland BioLabs (NASDAQ:CBLI), with 2083 calls trading, or 5x the recent average daily call volume in the name.

Bearish activity detected in CurrencyShares Japanese Yen (NYSEARCA:FXY), with 8473 puts trading, or 5x the recent average daily put volume in the name.

Bearish activity detected in Toyota Motor (NYSE:TM), with 2548 puts trading, or 2x the recent average daily put volume in the name.

Increasing volume is also being seen in International Coal (NYSE:ICO), Rackspace (NYSE:RAX), and the SPDR Energy ETF (NYSEARCA:XLE).