Friday Options Recap

by: Frederic Ruffy


Stocks are broadly lower, as tech shares and commodity prices fell Friday. Yahoo (NASDAQ:YHOO) is trading down 4 percent on reports Alibaba has transferred control of it's Alipay online banking unit without Yahoo's knowledge. Analysts are worried that Yahoo has lost control of the Chinese unit, which is viewed as key investment for the company. Meanwhile, NVdia (NASDAQ:NVDA) is seeing a 9.4 percent post-earnings loss and Rambus (NASDAQ:RMBS) sank on a negative court ruling. Oil prices and gold are also lower thanks to dollar strength. The euro lost 1 percent against the buck today and the dollar index gained .7 percent to 75.74. Crude hit a low of $97.09, but was recently up 40 cents to $99.37. Gold gave up $14.90 to $1,491.90. The day's economic news didn't have much market impact. The latest CPI was in-line with estimates at .4 percent. The University of Michigan Consumer Sentiment Index sits at 72.4 in mid-May, from 69.8 at the end of last month and above expectations of 69.5. Most of today's focus seems to be on the recent slide in the euro, as it reflects the ongoing concerns related to some of the deeply indebted EU countries. At the same time, the financials are weak. JP Morgan (NYSE:JPM), BofA (NYSE:BAC) and Traveler's (NYSE:TRV) are among the Dow's biggest losers. The industrial average is off 106 points. The tech-heavy NASDAQ lost 30.CBOE Volatility Index (.VIX) seized .87 to 16.90. Trading in the options market is slowing ahead of the weekend, with 7.3 million calls and 6.9 million puts traded so far.

Bullish Flow

Tyco (NYSE:TYC) shares are up $1.49 to $51 and trading in TYC options is brisk today, with 57,000 calls and 23,000 puts traded in the name so far. Investors are reacting to talk French-based Schneider Electric is in talks with private equity firms about a potential buyout (New York Post). Shares hit a high of $51.80 early, but gave back the gains after Schneider denied the talk (Reuters). In options action, a noteworthy three-way spread traded early when an investor apparently sold July 45 puts at 39 cents and bought the July 55 - 60 call spread at 69 cents, 4000X. A similar three way included the apparent sale of 2,840 Jun 49 puts at $1.12 and the purchase of Jul 55 - 60 call spreads, at $1.22. Separately, a block of 3,356 Jan13 55 calls traded at $1.20 and was possibly buyer-initiated. Finally, the top trade of the day is a block of 4,500 May 50 puts at 60 cents when the market was 50 to 64 cents, which might be a closing trade. Open interest is 16,389. Meanwhile, implied volatility surged 35 percent to 33, as some players in the options market seem to find some credibility in the speculation despite Schneider's statement suggesting otherwise.

Bearish Flow

NVidia loses $1.50 to $19 Friday, even after the graphics chips maker reporting an upside earnings surprise and issuing upside guidance for the second quarter. The stock had staged a 6-day 9.9 percent rally ahead of the news. Needham downgraded the stock to Hold from Buy on slowing of company's core graphics processor business. NVDA options are very heavily traded on the news. 12,000 calls and 18,000 puts in the first ten minutes. The at-the-money May 19 and Weekly 19 puts are the most actives, with 8,020 and 3,700 traded, respectively. May 19 and Weekly 20 calls are busy as well.

Goldman Sachs (NYSE:GS) is down another $2.40 to $140.35, the day after Rochdale analyst Dick Bove lowered his rating on the stock to Sell and said that the Justice Department is facing increasing pressure to launch a criminal lawsuit against the investment bank. GS took a 3.5 percent hit on the downgrade yesterday. Options are actively traded for a second day as well. 52,000 puts and 52,000 calls traded on the investment bank today. Weekly 140 puts, which are 35 cents OTM heading into the final 90 minutes of trading, are the most actives. 8,530 traded. Meanwhile, the top options trade of the day is a June 135 - 145 strangle sold at $5.10, 3000X, and possibly a bet that shares will hold between those two strikes between now and the June expiration, five weeks from today. Implied volatility in GS is up another 5 percent to 27.

Implied volatility Mover

Rambus suddenly saw an impressive spike to $21.69 per share ten minutes ago, but has since eased back to $19.59, up 32 cents on the session. Options are seeing a flurry of activity as well. 20,000 calls and 22,000 puts in the chipmaker so far. The action is mostly scattered across various May puts and calls. Out-of-the-money 17 puts and 25 calls are the most actives. Implied volatility jumped 14 percent to 79. The volatile action in Rambus follows an Appeals Court decision in the Hynix/Micron case (Briefing).

Unusual Volume Movers

Bearish activity detected in Helmerich and Payne (NYSE:HP), with 2848 puts trading, or 3x the recent avg daily put volume in the name.

Bearish activity detected in Prologis (NYSE:PLD), with 5062 puts trading, or 44x the recent avg daily put volume in the name.

Bullish flow detected in Cirrus Logic (NASDAQ:CRUS), with 10326 calls trading, or 2x the recent avg daily call volume in the name.

Increasing volume is also being seen in Eastman Kodak (EK), SINA, and Rambus.