Monday Options Recap

 |  Includes: DDC, EWG, KODK, MOS
by: Frederic Ruffy


Stock market averages are posting solid gains late-Monday. After last week’s 6.4 percent debacle, the Dow Jones Industrial Average wavered at the open, but had strengthened through midday along with European stock benchmarks. Germany’s DAX rallied nearly 3 percent and help lead benchmarks higher across the Eurozone amid weekend pledges of additional financial support from EU officials over the weekend. The domestic economic news included one lone report on New Home Sales, which slipped 2.3 percent to 295K in August and in-line with expectations. The Dow Jones Industrial Average was sporting a triple digit gain at midday and the rally gathered some additional momentum in afternoon action. With thirty minutes left to trade, the Dow is up 214 points and the tech-heavy NASDAQ has added 11. CBOE Volatility Index (.VIX) lost 1.40 to 39.84. Overall options volume is a bit light today, with 6.8 million calls and 6.4 million puts traded on the day.

Bullish Flow

After a seven-day 23.3 percent losing skid, Mosaic (NYSE:MOS) shares touched new 52-week lows of $54.5 today. The stock is down $1.67 to $56.03 and the top options trade in MOS today is a 4,395-contract block of Oct 65 calls at 90 cents on ISE. A customer bought-to-open, according to ISEE data. 9,288 now traded against 19,214 in open interest. Oct 65 calls on Mosaic are now 16 percent OTM with a delta of .2 and 25 days of life remaining. The stock took a hit Friday on earnings guidance (see 9/23 color) and the company said today that it will hold its Annual Stockholder meeting on Oct 6.

iShares Germany Fund (NYSEARCA:EWG) is up 52 cents to $18.27 and a 4,400-contract block of Oct 21 calls on the ETF at 35 cents per contract is an opening buyer, according to ISEE data. 9,090 traded against 1,682 in open interest. Oct 21 calls on the Germany fund are 14.9 percent OTM with a delta of .19 and 25 days of life remaining. Shares are up 6.5 percent from an intra-day low of $17.15 set Friday and down 31.8 percent over the past two months. EWG fetched $26.77 per share on 7/26.

Bearish Flow

Eastman Kodak (EK) loses 24 percent to $1.81 on reports the company tapped a $160 million line of credit. The move might have raised concerns about Kodak’s working capital needs. While shares tumbled on the news, one player bought 20,000 Jan13 $1 puts on EK at 45 cents per contract. 22,175 now traded against 7,170 in open interest. Total options volume is 25K calls and 42K puts, compared to typical midday volume of about 15K contracts.

Implied volatility Mover

Harry Winston Diamond (HWD) loses 16 cents to $10.51 and has now lost more than 30 percent month-to-date. At least one player seems to be looking for the stock to hold above $10 over the next few weeks, as Oct 10 puts on the Toronto-based miner and diamond retailer are apparently being sold to open. The action includes several multi-exchange sweeps at 35 cents when the market was 35 to 70 cents. Volume in the Oct 10 put is now 3,641 (90 percent bid) against zero contracts of open interest. Implied volatility is down 16 percent to 58.