Monday Options Recap

Includes: BAC, GMCR, JPM, MU, PSS, WDC
by: Frederic Ruffy


Stock market averages are holding gains on a slow day of trading Monday. With no earnings or economic data to guide the early action, the Dow Jones Industrial Average moved higher at the opening bell along with European stock market averages. After suffering two days of steep losses late last week, UK’s FTSE and France’s CAC 40 Index both gained 1.1 percent. Germany’s DAX, last week’s biggest losers finished with a small loss. The Dow moved higher at the open, but notable weakness in BofA (NYSE:BAC) and JP Morgan (NYSE:JPM), sent the industrials into negative territory through mid-morning. However, the situation had stabilized by midday and trading has been somewhat choppy and aimless from that point forward. With an hour to trade, the Dow Jones Industrial Average is 53 points. The tech-heavy NASDAQ added 2.6. CBOE Volatility Index (.VIX) is down .74 to 42.31. Options action is somewhat slow, with 7.8 million calls and 7.5 million puts traded so far.

Bullish Flow

Green Mountain Coffee Roasters (NASDAQ:GMCR) adds $1.64 to $85.72 and, after an 18.8 percent slide last week, is among the leaders in the NASDAQ 100 Monday morning. Recent options trades in GMCR is an apparent Oct 75 – 90 risk reversal, 1425X on AMEX. Looks like $2.35 was paid to buy calls, sell puts and open a new bullish position in the Waterbury, VT specialty coffee producer.

Micron Technology (NASDAQ:MU) adds 14 cents to $5.39 and early trades on the chipmaker include a Jan 7.5 – 10 call spread at 24 cents, 1450X. Looks buyer-initiated and has now traded 2500X. Open interest is sufficient to cover in both contracts and this might be a position adjustment. Or, the spread might be a new bullish play after a 52.3 percent drop in shares since April. Earnings were last reported 6/23.

Bearish Flow

Western Digital (NYSE:WDC) adds 20 cents to $26.62 and it look like one investror sold 4,850 Sep 28 puts at $2.51 to buy 10,185 Sep 25 puts at $1.14. The ratio spread might roll a position in the Sep 28 puts, which are 5 percent in-the-money and saw opening activity on 8/8, to a new larger position in the OTM Sep 25 puts. Shares are down 8.3 percent since that time and were hit with a Standard & Poor's Equity Sell rating, along with STX, on 8/18.

Implied volatility Mover

Collective Brands (NYSE:PSS) adds 11 cents to $9.62 and premium sellers are busy in the retailer ahead of an Aug 24 (after market) earnings release. Sep 10 calls are the most actives. 3,529 traded (81 percent Bid) against 375 in open interest. A multi-exchange sweep of 1,715 traded on the 55-cent bid. Meanwhile, 3,237 Sep 8 puts traded (67 percent bid) against 249 in open interest. The top trade is a sweep of 1800 on the 15-cent bid. Meanwhile, implied volatility in PSS is down 12.5 percent to 71. as today's premium writers seem to be looking for shares to hold between $8 and $10 through the earnings report and the Sep expiration (25 days).