Friday Options Recap

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Includes: AUXL, BRCD, DAL, EBAY, SAN, TLAB, UAL, VLO, WDC
by: Frederic Ruffy

Sentiment

Stocks are deep in the red on disappointing earnings and worries about the European Debt Crisis. Oracle (NASDAQ:ORCL) shares are off 4.2% after the software maker lowered its fourth quarter revenue outlook. At the same time, Micron Tech (NASDAQ:MU) lost 13.4% after its latest earnings and revenues fell well short of Street estimates. Problems across the Atlantic are weighing on Wall Street as well. The euro is trading down .6% on the dollar after Moody’s put several Italian banks up for review for possible downgrades. The domestic economic news, which included a 1.9% increase in May durable goods and an upwardly revised 1.9% first quarter economic growth, was a bit better-than-expected. But, with tech shares under pressure due to earnings woes and the European Debt Crisis still weighing on sentiment, sellers are active in the final hour heading into the weekend. Trading in the options market is slowing, but reflects the cautious underlying tone. 5.5 million calls and 5.8 million puts traded so far.

Bullish Flow

3,500 calls and only 50 puts traded in Tellabs (NASDAQ:TLAB) today. Shares are up a nickel to $4.45 and August 4 calls are the most actives. 2,530 traded, including two blocks (1250 each) at 60 and 65 cents when the market was 50 to 65 cents. Open interest is only 67. So this appears to be opening buyers of in-the-money call options on TLAB. Jan13 4 and July 3.5 calls are seeing interest as well. Shares hit a 52-week low of $3.98 on 6/13, but have been performing relatively well and are up 12.1 percent since that time.

Bearish Flow

Brocade (NASDAQ:BRCD) loses 34 cents to $6.33 and put volume is picking up in San Jose, CA data storage device maker after the company’s CFO resigned. Morning trades in BRCD include a multi-exchange sweep of 3215 Oct 6 puts at the 50-cent asking price. 5,000 now traded. Another sweep of 1,462 Jan 6 puts traded at the 71-cent ask price. 7,250 calls and 480 puts already traded in Brocade.

Implied Volatility Mover

Delta (NYSE:DAL) shares are down 54 cents to $9.40 and falling in sympathy with United Continental (NYSE:UAL). UAL lost 8.5% after lowering its revenues forecast. Meanwhile, trading in Delta options is brisk today. 11,000 calls and 17,000 puts so far. August 9 puts, which are 4.3% out-of-the-money, are the most actives. 5,280 traded and, with 98% of the flow trading at the ask, it looks like put buyers are driving the action. July 10, Sep 9 and Jan 7.5 puts on Delta are active as well. On the call side of the options chain, the Jul 9, Jul 10, Jul 11, and Aug 10s are seeing the most volume. Implied volatility in DAL options is up 9.5% to 51.

Unusual Volume Movers

Bearish activity detected in Santander Finance (STD), with 13456 puts trading, or 4x the recent average daily put volume in the name.

Bullish flow detected in Auxillium Pharmaceuticals (NASDAQ:AUXL), with 5107 calls trading, or 47x the recent average daily call volume in the name.

Bullish flow detected in Frontier Oil (NYSE:FTO), with 5518 calls trading, or 5x the recent average daily call volume in the name.

Increasing volume is also being seen in SanDisk (SNDK), Valero (NYSE:VLO) and EBAY.