Tuesday Options Recap

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 |  Includes: AAU, AVL, CHGS, FCX, MCPIQ, REE, SHZ, XRAY
by: Frederic Ruffy

Sentiment

Overall market action slowed Tuesday. With no economic data or earnings of importance to guide the early trading, the Dow Jones Industrial Average slipped at the open and gave back a modest amount of the 424-point rally tallied over the previous three trading session. From there, not much happened. Crude oil is getting some attention, as prices add $1.91 to $105 a barrel on escalating unrest in Libya and the Middle East. Beyond that, it’s a very slow news day on Wall Street. The Dow Jones Industrial Average has traded in a narrow 48-point range and is down 13 points. The tech-heavy NASDAQ lost 7. With 45 minutes left to trade, the CBOE Volatility Index (.VIX) is down .48 to 20.13. Options volume is much slower than in recent days. 6.8 million calls and 5.5 million puts traded so far.

Bullish Flow

37000 calls and 12000 puts have traded in Molycorp (MCP) today. Shares are up $4.70 to $49.38 after the company presented at a Thomson Reuters Global Mining and Steel Conference yesterday. Moly Corp reiterated first quarter sales guidance and noted higher prices of rare earth metal. Reuters also had a story yesterday noting price increases in China rare earth metal. Consequently, the sector (SHZ, CHGS, REE, AAU, AVL) is seeing relative strength and investors are showing interest in MCP April 50 and 60 calls, which have traded 7000 and 3250 contracts, respectively. April 49 and 55 calls, along with April 48 puts are seeing interest as well. Implied volatility is up about 8 percent to 54. Next earnings expected early May.

Bearish Flow

Freeport McMoran (NYSE:FCX) shares are down 64 cents to $51.79 and 14,670 April 50 puts traded on the miner today. The top trade is a 441-lot at $1.46 right at the opening bell. The market is now $1.51 to $1.53. Open interest is 17,921 and so some of the activity might be closing. The contract is currently $1.79 out of the money with 24 days of life remaining. Delta is -.35. Still, while some of the action is possibly closing, overall sentiment seems somewhat bearish in FCX this morning, as 23,000 puts and 9,240 calls traded and implied volatility is moving up 2 percent to 40.5. No news on the ticker. Next earnings expected around April 20, probably after the April expiration.

Implied Volatility Mover

Dentsfly (NASDAQ:XRAY) came under pressure mid-morning on increasing volume and is down 72 cents to $35.01. Investors are showing some interest in April 30 and 35 puts, which have traded 518 and 380X, respectively and are trading predominantly at the offer. Typical volume in XRAY is about 70 contracts. The top trade is a 50-lot of April 35 puts at the $1.15 asking price. However, the stock has since made up most of the loss and is trading down 17 cents to $35.56. Implied volatility is also easing, down 4 percent to 27.5. No obvious news items on the stock to explain the unusual action.