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Sentiment

Stocks are trading mixed late-Monday. With no economic calendar on the docket the focus early in the day was on corporate deal news after Wendy’s/Arby’s (NASDAQ:WEN) said it was selling Arby’s to private equity and VFC made a $2.2 billion bid for Timberland (NYSE:TBL). However, any early rally attempts were thwarted mid-morning after Standard & Poor’s cut Greece and warned that default was likely. Stock market averages dipped on the news and the Dow Jones Industrial Average now clings to a 10-point gain. The tech-heavy NASDAQ is flat. With 50 minutes left to trade, the CBOE Volatility Index (.VIX) is up .42 to 19.29. Trading in the options market is active and continues to reflect the cautious underlying tone on Wall Street. 6.6 million calls and 6.5 million puts traded thus far.

Bullish Flow

Harvest Natural Resources (NYSE:HNR) with relative strength and increased call activity today after the driller struck black gold off the coast of Gabon. Shares are up 17.8 percent to $12.38 and 4,270 calls traded in the name. Jun 12.5 calls, which sit 12 cents OTM with four days of life remaining, are the most actives. 1,965 traded (89 percent Ask) against 5,103 in open interest. Jun 15 and Sep 12.5 calls are seeing interest as well.
14,000 calls and 1,330 puts traded in Chesapeake (NYSE:CHK) through midday. Shares are up 7 cents to $29.31 and Jun 30 calls, which are 2.35 percent OTM and expiring at the end of the week, are the most actives. 7,150 traded (60 percent Ask) against 5,932 in open interest. Jul 30, 31 and 32 calls are seeing interest as well. Looks like speculative call buying. The company announced today that it was increasing its quarterly dividend by 17 percent.

Bearish Flow

Regions Financial (NYSE:RF) loses 15 cents to $5.99 on reports of an internal probe (Briefing). Early options volume in RF includes Jan 7.5 calls traded at the 33 cent asking price. More than 4,000 so far and might be closing trades. Open interest in the contract is 94,852 and easily the largest position in the regional bank. RF Jan 7.5 call is now 25.2 percent OTM with a delta of .30.

Implied volatility Mover

Sears Holdings (NASDAQ:SHLD) is rallying and options volume is 3.5X the average daily. 7,590 calls and 7,030 puts traded on the retailer. The top trades are part of Jun 70 - Jul 75 put spread, which traded at $1.50, 1928X. The spread appears to be rolling of a position out one month and to OTM from ITM puts. June 70, 72.5 and 75 calls are also actively traded. Implied volatility is up 12 percent to 36. Shares are rallying $3.59 to $71.94 (best NASDAQ 100 gainer), but with no headlines to explain the relative strength and increased options activity in Sears today.
Source: Monday Options Recap