Thursday Options Recap

by: Frederic Ruffy


Stock market averages posted solid gains with help from better-than-expected jobs data Thursday. The day before the Labor Department releases its June report, ADP said the U.S. economy added 157,000 private sector jobs last month. Economists were expecting the report to show a much more modest increase of 60,000. Meanwhile, the Labor Department said that filings for jobless benefits decreased by 14,000 in the week ended July 2. Economists were looking for a decline of about 7,000. The reports fueled some optimism ahead of Friday’s data. The report, which includes both public and private sector jobs, is expected to show 90,000 new jobs created and an unemployment rate of 9.1%. Stock market averages were solidly higher ahead of the news. The pace of options activity picked up noticeably today as well. 8.8 million calls and 7.4 million puts traded across the nine options exchanges as of this afternoon.

Bullish Flow

American Eagle (NYSE:AEO) is rallying early Thursday after Gap Stores (NYSE:GPS), The Limited (LTD) and some of the other apparel retailers reported better-than-expected June sales numbers on discounts, lower gas prices and warmer weather. (Teen apparel retailers Aeropostale (NYSE:ARO), AEO and Abercrombie & Fitch (NYSE:ANF) are no longer reporting monthly results). AEO is up 97 cents to $14.10 and in options action, 9,690 calls and 2,450 puts traded in the name. By way of comparison, typical volume in AEO through the first 30 minutes is about 400 contracts. November 15 calls, which are now 6.4% out-of-the-money, are the most actives. 3,410 traded (96% Ask) against 837 in open interest. Jul 14 calls, Aug 14 puts, and Nov 17 calls on American Eagle are seeing interest as well.

Interesting trade in Apple (NASDAQ:AAPL) today, as the Aug 330 – 335 – 340 put fly is sold at 17 cents, 7,500X. 15,000 Aug 335 puts were bought at $4.60 per contract and might be a closing trade, as Apple shares are up $5.94 to $357.70 and the 335 puts are now 6.3% out-of-the-money. After closing at its lowest levels of the year on June 20, Apple shares recaptured a 200-day moving average on Jun 21 and have rallied 13.4% since that time.

Bearish Flow

Procter & Gamble (NYSE:PG) adds 13 cents to $64.83 and one strategist sells the Jan 65 – 70 call spread on PG at $1.58, 17,900X. While open interest is sufficient to cover in both contracts, there’s nothing in the historical data that indicates this spread has previously traded in any significant size. So it might be a new position or possibly rolling activity after a 1.9% gain in shares so far this month. PG hit a 52-week high of $67.72 on May 17, but then dropped to $62.55 through Jun 29.

Implied Volatility Mover

Forest Oil (NYSE:FST) implied volatility moved up today after the independent oil and gas company updated its 2011 outlook. Some analysts slashed their earnings estimates on the heels of the revised forecast. Consequently, shares fell to new 52-week lows and are down $3.63 to $24.43 in late trading. Options volume is 8,490 calls and 7,650 puts. Typical daily volume in FST is about 2,500 contracts. July 24 calls, August 25 calls, and August 24 puts are the most actives. Meanwhile, implied volatility in FST options jumped 20% to 45 on the day.

Unusual Volume Movers

Bullish flow detected in STEC (NASDAQ:STEC), with 5,002 calls trading, or 3x the recent average daily call volume in the name.

Bullish flow detected in Swift Transportation (NYSE:SWFT), with 2,828 calls trading, or 14x the recent average daily call volume in the name.

Bullish flow detected in Applied Materials (NASDAQ:AMAT), with 21,885 calls trading, or 5x the recent average daily call volume in the name.

Increasing volume is also being seen in Sara Lee (SLE), Amkor Technology (NASDAQ:AMKR) and Seagate (NASDAQ:STX).