Thursday Options Recap

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 |  Includes: AAPL, MU, NHP, SPXL, TKLC, TRV, XLE, ZAGG
by: Frederic Ruffy

Sentiment

Stock market averages fell sharply Thursday morning, but tech shares are leading a rebound into the final hour of trading. The table was set for morning weakness on Wall Street after European stock benchmarks came under fire, along with the euro, on cautious comments from ECB President Jean-Claude Trichet. The head of the European Central Bank warned that the economic situation is becoming precious in the Eurozone due to the ongoing debt crisis. The euro is trading down .7 percent to 1.423 against the buck, but now well off the day’s lows. (1.417). The domestic economic news included a report on jobless claims, which increased by 15,000 last week. Economists were expecting claims to stay around 415K. New Home Sales dipped to an annual rate of 319,000 last month; down from 326,000 in April, but better than the 305,000 that was expected. At the same time, a plunge in crude oil is weighing on energy-related names. Crude lost $3.71 to $91.70 after the Obama administration outlined plans to tap strategic reserves. Gold gave up $33.4 to $1520 an ounce. Yet, while stock market averages were deep in the red through mid-session, trading is mixed late-Thursday. The Dow Jones Industrial Average is down 73 points and the tech-heavy NASDAQ added 12.5. CBOE Volatility Index (.VIX) rallied to 21.5 in early trading and is now up .85 to 19.37. Trading in the options market is active, with 7.7 million calls and 8.8 million puts traded across the nine options exchanges so far.


Bullish Flow

Apple Computer (NASDAQ:AAPL) is up $6.43 to $329.04 and helping to lift the tech-heavy NASDAQ out of a hole late Thursday. The NASDAQ fell to a low of 2,627.47 Thursday morning, but is now up 9.73 points to 2,678.92. Smart phone makers RIM and APPL are trading higher today and Apple shares might also be getting a lift from a forecast from CLSA, which said over 14 million iPads could be sold in the third quarter. Meanwhile, the options action in Apple is interesting. as the six most actively contracts expire at the end of this week. The Weekly 360 calls, which are very near-the-money, are the most actives. 39,400 traded. AAPL Weekly 320 puts, 325 calls, 325 puts, 315 puts, and 320 calls are heavily traded as well. These contracts have 1 day and thirty minutes of life remaining, and it appears that some investors are taking positoins and bracing for another sizeable move in Apple shares tomorrow.

Traveler’s (NYSE:TRV) loses 54 cents to $56.78. In options action, 3,450 calls and 1,965 puts traded on the insurance company. Typical volume for this time of day is about 405 contracts. The top trades of the day are part of a ratio risk-reversal, after an investor sold 750 Jan 50 puts and bought 15,00 Jan 65 calls, collecting 27.5 cents (on 1X2) and possibly closing a position. August 60 and July 55 calls on TRV are seeing interest as well.


Bearish Flow

SPDR Energy Fund (NYSEARCA:XLE) loses $1.62 to $71.48 after the Obama administration and IEA unveiled plans to tap strategic reserves. Crude oil is down $4.41 to $91 per barrel on the news. XLE, which holds shares of all the energy-related names in the S&P 500, is down $1.62 to $71.48. Meanwhile, 31,000 calls and 96,000 puts traded on the ETF, including more than 50,000 Sep 72 puts. Some players might be closing positions. The contract is now 52 cents ITM and has open interest of 114,990, which is the biggest position among XLE options.


Implied volatility Movers

Out of 3639 listed products, 2521 (69%) are trading with 30day at-the-money Implied Volatilities higher on the day. Among liquid products, the largest increases include ZAGG (91.2% IV +12.1), TKLC (46.6% IV +8.9), BGU (53.6% IV +8.6), NHP (35.2% IV +8.3) and MU (57.6% IV +7.2). Broad market benchmark SP500 index 30day ATM IV is at 17.7%, an increase of 1.5 points as the index trades near 1273.10, off -1.12%.