Tuesday Options Recap

 |  Includes: AVL, HBI, INTC, MCPIQ, REDF, REE
by: Frederic Ruffy


Stocks are mixed in a day of slow trading. With no significant economic or earnings news to guide the morning trading, market action was sluggish at the open. A report on Factory Orders hit the newswires thirty minutes into trading and had little market impact. The data showed Factory Orders up .8 percent and .2 percent less-than-expected. Stock market averages will little changed at midday and a bit of selling surfaced in afternoon action after Moody’s downgraded Portugal. The news triggered a dip in the euro and a modest pullback in stock market averages, but market action has once again turned mixed. With less than an hour to trade, the Dow Jones Industrial Average is down 10 points, but the tech-heavy NASDAQ has added 7.8. CBOE Volatility Index (.VIX) is up .29 to 16.16. Trading in the options market is running at respectable levels and heavily influenced by ex-dividend trading activity in call options. 11 million calls and 5.25 million puts traded so far.

Bullish Flow

Rediff (NASDAQ:REDF) is rallying and call options on the Mumbai-based Internet information services provider are actively traded today. Shares are up $1.22 to $10.58. Options volume is 5,175 calls and 85 puts, or 3.5X the average daily for the name. July 12.5 calls are the most actives. 1,611 traded (86 percent Ask). July 7.5, July 10 and Jan 15 calls are seeing interest as well. Speculative call buying has lifted implied vols in REDF options 11.5 percent to 99, but with no headlines on the company to explain the bullish action Tuesday morning.

Unusual options activity surfaced in Hanesbrands (NYSE:HBI) as well. Shares add 52 cents to $29.97 and options volume is running 15X the average daily, being driven by Aug 30 call buyers. 2,248 contracts traded (70 percent Ask) against 42 contracts in open interest. ISEE data is also consistent with opening call buyers. Implied volatility is up 7 percent to 37. No recent news in Hanesbrands. Shares have performed well lately, up 11.3 percent since June 16. Next earnings slated for mid to late-July.

Bearish Flow

Intel (NASDAQ:INTC) loses 7 cents to $22.46 and a 10,000-contract block of Jul 22 puts on the chipmaker is bought at 16 cents per contract. The position is possibly closing. Today’s volume of 10,535 contracts represents about 35 percent of the existing open interest in the Intel Jul 22 puts. The contract is 2 percent OTM with a delta of -.29 and expiring in 10 days. Intel is due to release its earnings on July 20 (after market), which is the Wednesday after the July expiration.

Implied volatility Mover

Molycorp (MCP) is down 90 cents to $58.94 amid relative weakness in the rare earth names (REE, AVL) on reports reserves have been found on the Pacific Ocean floor. Researchers discovered large samples of rare earth materials in ocean mud, according to an article on allgov.com. Shares are down and MCP Jul puts are seeing interest. It looks like some investors see the weakness as an opportunity to write downside puts. 1,860 MCP Jul 55 puts have traded (93 percent bid). Another 1,305 Jul 57.5 puts changed hands (81 percent bid). Meanwhile, implied volatility in Molycorp options is up about 5 percent to 57.