Thursday Options Recap

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Includes: CHBT, RMBS, TXN, TXT
by: Frederic Ruffy

Sentiment

Stocks bounced Thursday. After a 6-day 521-point slide, the Dow Jones Industrial Average opened higher following a round of mixed economic news. According to the Labor Department, jobless claims increased by 5,000 to 427,000 in the week ended June 9. Economists were looking for an increase of 1,000. However, separate data showed the Trade Balance narrowing to -$43.7 billion in April, which was down from $46.8 the month before and much narrower than the $48.7 billion that was expected. A third report on wholesale inventories released later (+.8 percent for April) was a non-event. Outside of that, it’s been a relatively slow news day. The euro lost .5 percent against the buck after the ECB signaled a rate increase at its July meeting, but scaled back inflation expectations. Crude oil added $1.05 to $101.79 per barrel and gold gained $6.7 to $1,545.40 an ounce. The Dow is up 112 points and the NASDAQ gained 16.5. CBOE Volatility Index (.VIX) is down 1.34 to 17.45. Trading in the options market seems neutral with respect to sentiment. 6 million calls and 6 million puts traded so far.

Bullish Flow

Rambus (NASDAQ:RMBS) is down 13 cents to $13.68 and the Jan 15 – 20 call spread is bought at $1.15, 3600X. The spread might roll down in strike prices and looks like a bullish play on the chipmaker. Shares are seeing relative weakness today, the day after the company announced plans for a 6.38 million share stock offering. RMBS is down 29 percent since losing a court ruling on May 13.

Upside call buying in Textron (NYSE:TXT) today. Shares of the Providence, RI conglomerate are up 24 cents to $21.45. Jun 22 calls, which are 2.6 percent OTM and expire in 8 days, are the most actives. 4,190 traded (73 percent Ask). Jul 21, Jul 23 and Sep 25 calls are seeing interst as well. 13,000 calls and 2,100 puts traded in the name, which is 5X the normal. No headlines on the stock. Some investors might be bottom-fishing after a 23.7 percent slide in shares since 4/5.

Bearish Flow

Texas Instruments (NYSE:TXN) puts are seeing interest early-Thursday after the chipmaker lowered its revenue/earnings guidance in a mid-quarter update Wednesday afternoon. Shares hit a low of $30.87 in the afterhours session, but are now down just 12 cents to $32.55. Options volume in the first five minutes is 5,700 puts and 1,325 calls. It includes a multi-exchange sweep of 2,530 Jul 33 puts at $1.19 when the market was $1.16 to $1.20. Volume in the contract is now more than 3,000 and the most active TXN options thus far. Jun and Jul 32 puts are seeing some interest. Oct 33 puts and calls are also among the most actives.

Implied volatility Mover

China Biotics (OTC:CHBT) is a big mover today. Shares are down 52 cents to $5.06 and giving back 69.3 percent of a 15.5 percent rally from the day before. No news to explain the volatility in the stock. Some sources had today (before market) as an earnings release date. However, it doesn’t appear that the results were posted. For whatever reason, the stock is down 8.6 percent. Options volume is 12,000 puts and 4,200 calls. The top trades are a Jun 3 – 4 put spread, bought at 32 cents, 5000X on AMEX. It’s not tied and might be closing trade or roll, as open interest is sufficient to cover and both contracts expire at the end of next week. Implied volatility is up 2.5 percent and elevated at 219 after a 57.6 percent plunge in the stock price since May 18.