Friday Options Recap

by: Frederic Ruffy


Stock market averages are down for a seventh time in eight days. The Dow Jones Industrial Average, which snapped a six-day losing streak yesterday, opened sharply lower after data released early showed a unexpected increase in import prices. Increasing inflationary pressures from abroad come at a bad time, as other data on manufacturing and employment point to a substantial slowdown in economic activity. Meanwhile, the euro is down 1.1% against the dollar on concerns about European debt problems and dollar strength is weighing on oil prices. Crude is down $2.54 to $99.39 per barrel. Gold lost $8.6 to $1,534.10 an ounce. The Dow Jones Industrial Average is down 126 points and the tech-heavy Nasdaq lost 25.4. CBOE Volatility Index (.VIX) is up .40 to 18.19 and off session highs of 19.16. Trading in the options market remains defensive, with 8.6 million calls and 8.7 million puts traded so far.
Bullish Flow
BofA (NYSE:BAC) loses 13 cents to $10.52 and one strategist sells the Feb 7 – 8 put spread to buy Feb 14 calls, paying 9 cents for the three-way, 10000X. Position looks opening and comes as shares touch new 52-week lows of $10.49. BAC, Wells Fargo (NYSE:WFC) and JP Morgan (NYSE:JPM) were the subject of sizable bullish trades yesterday as well. Some investors, like today’s spread trader in BAC, appear to be taking some positions this week and calling a bottom in the big banks.
Radioshack (NYSE:RSH) loses 11 cents to $12.72 and a multi-exchange sweep of 5,000 July 15 calls at 9 cents is an opening customer buyer, according to ISEE data. The purchase comes after an impressive 9-day 19.3% losing streak in RSH. No news on the stock today. Radioshack shares touched a new 52-week low of $12.51 earlier today.
Bearish Flow
Suntech Power Holdings (NYSE:STP) is down 37 cents to $7.11 amid increasing put activity today. 12,000 contracts traded, which compares to call volume of 2,180 calls. Jan 4 puts, which are 43.7% out-of-the-money and have open interest of 100 contracts, are the most actives. 5,325 traded and 91% at the ask. Jun and July 7 puts are actively traded as well. Implied volatility jumped 23% to 59. Stifel analysts were out with cautious comments on the Chinese solar complex Friday morning.
Implied Volatility Mover
CBOE Volatility Index (.VIX) is up .97 to 18.74 Friday morning and making a run at Wednesday’s two-month closing high of 18.79. Today’s jump in the VIX comes amid a broad sell-off on Wall Street with all 30 components of the Dow Jones Industrial Average under water. The euro is down more than 1% against the buck and crude oil lost $2.76 to $99.17 per barrel. Stock market averages finished mixed in Asia, but are broadly lower across Europe. Meanwhile, 94,000 calls and 14,000 puts have traded in the volatility index. VIX July 32.5 and June 20 calls are today’s two most actively-traded index products, with 29,000 and 19,000 traded, respectively. The volatility index is up 21.3% month-to-date and some investors seem to be anticipating additional upside. VIX June calls expire in four days.
Unusual Volume Movers
Bearish activity detected in Santander Finance (STD), with 6900 puts trading, or 3x the recent average daily put volume in the name.
Bearish activity detected in Cemex (NYSE:CX), with 5435 puts trading, or 4x the recent average daily put volume in the name.
Bullish flow detected in Pain Therapeutics (NASDAQ:PTIE), with 7066 calls trading, or 26x the recent average daily call volume in the name.
Increasing volume is also being seen in JP Morgan (JPM), BofA (BAC), and McGraw Hill (MHP).