Tuesday Options Recap

by: Frederic Ruffy


Stock market averages are posting gains on earnings news and better-than-expected Consumer Confidence data. Ford Motor (NYSE:F), 3M (NYSE:MMM), and Delta Airlines (NYSE:DAL) are among the names seeing post-earnings strength Wednesday. Meanwhile, the Conference Board reported that its Consumer Confidence Index for April increased to 65.4, from 63.8 in March and better than the 64.4 that economists had predicted. Now, focus turns to Durable Goods data tomorrow morning and the Fed’s post-FOMC statement Wednesday afternoon. Investors don’t seem too worried. As evidence, the Dow Jones Industrial Average is up 132 points late-Tuesday. The NASDAQ has added 27.5 and the CBOE Volatility Index (.VIX) edged down .40 to 15.37. Overall options volume is running about the typical levels, with 8.3 million calls and 6.3 million puts traded so far.

Bullish Flow

Microsoft (NASDAQ:MSFT) adds 26 cents to $25.86 and volume in the Weekly (4/29) 26 calls is approaching 12,000 contracts in the early-minutes of Tuesday’s session. The top trade is a 2,203-contract block at the 34-cent asking price. 78 percent of the volume is trading at the ask. Buyers appear to be driving the action ahead of earnings, due April 28 (after market). The weeklys cease trading the next day and the 26 calls are .5 percent out-of-the-money with a delta of .50.

Yahoo (NASDAQ:YHOO) shares added 14 cents to $17.25 and recent options trades in the Internet search giant is a three-way spread, in which the investor apparently sold 25000 Oct 15 puts at 69 cents to buy the Oct 18 – 20 call spread at 63 cents, 25000X on ISE. Looks like a new position tied to 1.05 million shares at $17.25. Separately, the Oct 15 – Jul 19 bullish risk-reversal trades at 15 cents, 21000X. It also looks opening and tied to 1.21 million shares at $17.19. YHOO shares added 4.6 percent on 4/20 after earnings were reported and are up another 2.3 percent since that time.

Bearish Flow

Allied Nevada Gold (NYSEMKT:ANV) adds $1 to $39.73 after the miner announced a discovery in a high-grade zone at Hoasbrouck, which includes both gold and silver. Yet, while shares are shining, players in the options market are focused on ANV put options. The top trade is a 2,200-contract block of Sep 30 puts a the $1.05 asking price. 7,070 traded. June and Sep 35 puts are seeing interest as well. Some shareholders might be buying puts to protect recent gains in ANV, as the stock is up 153 percent since late-July. Earnings slated for May 5 (before market).

Implied volatility Mover

Put buyers resurfaced in Longtop Financial (NYSE:LFT) Tuesday morning. Shares touched new 52-week lows and are down $1.54 to $24. The weakness is apparently due to negative note from Citron Research. Meanwhile, 23,000 puts and 5,600 calls have traded in the name so far. May 20 puts, which are 16.7 percent out-of-the-money and expire in three and half weeks, are the most actives. 6,860 trades so far. May 15, May 22.5, May 25 and Jun 20 puts are seeing interest as well. Today’s volume seems to include of mix of put buyers and sellers. Some of the activity might be closing, as LFT, a Hong Kong-based software provider serving the financial industry, was the subject of bearish trading multiple times earlier this month. Shares are down in eleven of the past twelve trading sessions and have tumbled 26.5 percent during that time. Implied volatility is elevated at 88, up from 45 a month ago.