Tuesday Options Recap

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 |  Includes: AMD, CMEDQ, LEN, LO, PHM, SODA, SPY, UPS, VIAV
by: Frederic Ruffy

Sentiment

Stock market averages are mixed on a slow news day and ahead of comments from Federal Reserve Chairman Ben Bernanke. The head of the U.S. Central Bank was due to speak at a banking conference in Atlanta at 3:45 p.m. The only other event on the economic calendar today is a report on Consumer Credit, which shows an increase to $6.3 billion in April, up from $4.8 billion and more than the $6 billion that economists had expected. The market showed little reaction to the data. The stock news is light. Temple Inland (NYSE:TIN) shares are up on news International Paper (NYSE:IP) has made a $3.3 billion unsolicited offer for the company.

Bullish Flow

Advanced Micro Devices (NASDAQ:AMD) options are actively traded today. 17K calls and 12K puts so far, which is 3X the typical volume for midday. Shares are down a nickel to $7.75 and the top trade of the day looks like an Oct 7-10 bullish risk-reversal, sold at 26 cents, 7500X on AMEX. Looks tied to 500K shares at $7.75 and might be a closing trade, as both contracts have sufficient open interest. Jun 8, Jul 8, Oct 8 and Oct 9 calls in AMD are actively traded as well. The company announced today that it is reintroducing an FX brand of processors and platforms.

Bearish Flow

Impressive put butterfly spreads in the S&P 500 Trust (NYSEARCA:SPY) today. Shares have added 59 cents to $129.64 and one strategist bought the Jul 112 – 120 – 128 put fly at $1.22, 40000X. The position is tied to 958K shares at $129.05. The second spread is a Jul 113 – 121 – 129 put butterfly. $1.44 was paid, 30000X, and was also tied to shares. Both of these spreads appear to be short-term hedges through the July expiration, as the first offers a max pay-off if shares fall to $120 and the second at $121.

Implied volatility Mover

Lorillard (NYSE:LO) is down and implied volatility up for a second day. Shares came under pressure to start the week after a court ruled that a tobacco racketeering suit could proceed (see 6/6 color). LO is down another $2.44 to $97.46 and has now lost 15.5 percent month-to-date. Today’s options volume is 5,350 puts and 1,460 calls. Jun 90, 95 and 97.5 puts are seeing interest. Some investors are active in the July 95 and Jan 75 puts. Meanwhile, implied volatility in LO options moved 9% higher to 58 and now up more than 80 percent so far during the month of June.

Unusual Volume Movers

Bearish activity detected in PulteGroup (NYSE:PHM), with 8101 puts trading, or 4x the recent average daily put volume in the name.

Bullish flow detected in SodaStream International (NASDAQ:SODA), with 7331 calls trading, or 4x the recent average daily call volume in the name.

Bearish activity detected in China Medical Technologies (CMED), with 3579 puts trading, or 3x the recent avg daily put volume in the name.

Increasing volume is also being seen in UPS, Lennar (NYSE:LEN) and JDS Uniphase (JDSU).