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Sentiment

Stock market averages are holding modest gains in a day of very slow trading Monday. Economic data was in focus early after a report showed personal spending up .7 percent in February, which was .2 percent better than expected. Incomes rose .3 percent and in-line with estimates. AT&T (NYSE:T) and Verizon (NYSE:VZ) are higher and helping the Dow Jones Industrial Average on an analyst upgrade of the telecommunication sector. Crude oil is down $1.49 to $103.91 a barrel and gold lost $7.2 to $1419 an ounce. Concerns about escalating conflict in Libya, the European Debt Crisis, and the Japan nuke disaster continue to affect sentiment, but overall, there’s hasn’t been much volume or volatility today. The Dow has traded in a narrow 52-point range and is up 24 points. The NASDAQ is flat. CBOE Volatility Index (.VIX) gained .53 to 18.44. With 50 minutes left to trade, 6.6 million calls and 4.3 million puts have traded across the nine options exchanges.

Bullish Flow

Citi (NYSE:C) loses 4 cents to $4.42 and the top options trade in the bank today is a July 4.5 straddle sold at 49 cents, 16750X, which appears to be a bet that the stock will drift towards $4.5 through July. Earnings will come into play on April 18 and the contracts will be adjusted due to a 10-for-1 reverse stock split, which will go take place on May 6. Today’s noteworthy trades in Citi also include July 4.5 – 5 call spreads, which have traded multiple times. 10000 were bought at 16 cents and looks like a bullish spread targeting $5 per share.

MEMC (WFR) loses 4 cents to $12.87 and the Apr – May 13 call spread is seeing interest in early trading Monday. 300 traded at 49 cents on ISE. Looks buyer-initiated. Volume in both contracts now exceeds 3000 and the spread trading might be rolling of a bullish position, out from April to May. The April 13 calls are 13 cents out-of-the-money and expire in 18 days. Open interest is 9K and the third largest position in MEMC.

Bearish Flow

Wells Fargo (NYSE:WFC) loses 6 cents to $31.88 and a block of 18,693 Jan 35 calls trades at $2.03 this morning on ISE. The market was $2.03 to $2.07 and the trade might be a liquidating sale, as open interest is 73,761 and currently the biggest position in WFC. More than 20,000 now traded. The contract is 9.8 percent out-of-the-money with a delta of .40.

Implied Volatility Mover

Walter Investment Management (NYSE:WAC), a Tampa, FL REIT and asset manager, is trading down $1.81 to $17.47 and implied volatility is up after the company announced plans to buy Green Tree for $1.07 billion. Walter Investment will take on $20 million in debt and issue 1.8 million shares. The deal is expected to close in the third quarter and WAC will no longer qualify as a REIT. The most active options are the September 20 calls. 3356 traded (64 percent at the Ask) vs. 204 in open interest. Meanwhile, Sep 17 and 18 puts are the next most actives and trading 55 percent on the bid. So, while the stock is reeling, the overall flow looks somewhat bullish. Implied volatility is up 35 percent to 27.

Source: Monday Options Recap