Monday Options Recap

by: Frederic Ruffy


Stock market averages opened lower after another day of selling across Eurozone equity markets. France’s CAC 40 Index lost 4 percent and paced the decline on concern Moody’s might soon cut ratings on French banks. Germany’s DAX, Spain’s IBEX, and UK’s FTSE also started the trading week with losses. With no earnings of importance or economic data to guide trading, followed European markets lower when the opening bell rang on Wall Street. The NASDAQ managed a modest morning gain after Broadcom (BRCM) boosted chip stocks by making a bid for Net Logic (NASDAQ:NETL). However, with less than an hour to trade, the NASDAQ is under water and has given up 13 points on the day. The Dow Jones Industrial Average is down 117 points. CBOE Volatility Index (.VIX) gained 3.48 to 42. Trading in the options reflects the bearish underlying tone, with 7 million calls and 7.9 million puts traded across the exchanges so far.

Bullish Flow

Big Prints in Apple Computer (NASDAQ:AAPL) late-Monday after the the Sep 430 - 435 call spread on AAPL is bought at 3 cents, 15700X on PHLX and at 3 cents, 13870X on AMEX. Both contracts now traded 31,000. Shares are off $3.05 to $374.43 and the Sep 430s are 14.8 percent out-of-the-money with four days + 30 minutes of life remaining. It's probably closing activity, and exiting of positions opened in late-July when Apple was north of $400. For example, on 7/26 the spread was sold at $1 even, 5000X. Apparently, the strategist would rather pay the 3-cent debit plus transaction costs and bank the profit on the spread today, rather than run the risk of seeing Apple shares rally beyond $430 through end of the week.

Top equity options trade in the early minutes of Monday’s session was in Sandridge Energy (NYSE:SD) after one strategist sold 6,236 Sep 6 puts at 9 cents. 10,020 now traded and might close positions opened Friday, which resulted in 9,525 contracts of new open interest and included a 7,145-contract block at the 15-cent asking price. Sep 6 put on SD is 12.7 percent OTM and expires at the end of the week. The stock saw relative weakness Friday, down 6.4 percent, on light volume and no news. However, shares have edged up 6 cents to $6.93 Monday morning.

Bearish Flow

Kraft (KFT) loses 55 cents to $33.96 and an Oct 30 – 33 risk-reversal trades on the food company at $1.31, 2500X on ISE. Sentiment data indicate puts bought, calls sold. A number of other names in the space are seeing bearish trading today as well. Bearish activity was detected in General Mills (NYSE:GIS), with 4579 puts trading, or 3x the recent average daily put volume in the name. The stock is down 69 cents to $36.83. Options volume in Chiquita Brands (NYSE:CQB) includes 2,590 Jan 7.5 puts. Shares lost 19 cents to $9.07. Meanwhile, bearish activity has also been detected in Conagra Foods (NYSE:CAG), which is down 26 cents to $23.54. 5,140 puts traded in CAG, which is 6X the recent average daily volume.

Implied Volatility Mover

Intel (NASDAQ:INTC) adds 37 cents to $20.07 and the best gainer in the Dow Jones Industrial Average today. Meanwhile, a Sep 20 straddle (September 20 puts and September 20 calls) is apparently bought on the chipmaker at 67 cents, 11100X on ISE. Sentiment data indicate a firm opened a new position and the position looks tied to 89K shares at $20.05. The short-term premium purchase might be a play on anticipated volatility in Intel during the company’s Developer Forum, which is being hosted this week. Registration begins tomorrow morning and the event lasts through Thursday afternoon. Implied volatility in Intel options is up 6.5 percent to 32.5 ahead of the conference.

Unusual Volume Movers

Bullish flow detected in iShares MSCI Mexico (NYSEARCA:EWW), with 2799 calls trading, or 2x the recent average daily call volume in the name.

Bullish flow detected in McMoRan Exploration (NYSE:MMR), with 22,960 calls trading, or 4x the recent average daily call volume in the name.

Bearish activity detected in Marathon Petroleum (NYSE:MPC), with 2180 puts trading, or 2x the recent average daily put volume in the name.

Meanwhile, high options volume is being seen in CurrencyShares Euro ETF (NYSEARCA:FXE), PowerShares Bullish Dollar Fund (NYSEARCA:UUP), and FedEx (NYSE:FDX).