Thursday Options Recap

by: Frederic Ruffy


Stock market averages have given up early gains and are now mixed late-Thursday. News that German officials supported Chancellor Merkel in approving a larger EU bailout package helped set the table for morning gains on Wall Street. Economic data was bullish as well. The Labor Department reported that weekly jobless claims fell by 37,000 to 391K in the period ended 9/24. Economists were expecting a decline of just 9,000. Meanwhile, separate data showed third quarter GDP running at a 1.3 percent annual rate and .1 percent more than expected. Yet, while the Dow Jones Industrial Average was up more than 160 points through midday, the underlying tone of trading turned bearish once again in afternoon action. The tech-sector and big losses in a handful of four-letter stocks, like Green Mountain Coffee Roasters (NASDAQ:GMCR) and Netflix (NASDAQ:NFLX), are weighing on the NASDAQ. A number of US-listed Chinese companies are also taking a hit on reports the DOJ and SEC are investigating accounting irregularities (see today’s Implied Volatility Mover section). End of quarter position squaring is a factor as well. Consequently, the Dow Jones Industrial Average is now up 41 points, but more than 200 off session highs. The tech-heavy NASDAQ is taking a 34-point hit. CBOE Volatility Index (.VIX) is down .38, but remains elevated t 40.1 ahead of the historically volatile month of October. Trading in the options market is more active than yesterday, but volume is light. 6.8 million calls and 7.4 million puts traded so far.

Bullish Flow

Mosaic (NYSE:MOS) loses $2.29 to $54.90 after the company reported earnings after the closing bell Wednesday. The results were in-line with a previous pre-announcement, but potash pricing disappointed. The stock touched a 52-week low of $52.61, but is now up 4.4 percent from those lows. Options volume in Mosaic through Noon ET includes 49,000 calls and 27,000 puts. The top trade is a 9,486-contract block of Oct 62.5 calls at 77 cents on ISE. It’s an opening customer buyer, according to ISEE data. 12,247 traded, which makes it the most actives in Mosaic. A 5,673-contract block of Oct 65 calls traded at 42 cents at the same time as the 62.5s, also on ISE and also an opening buyer. Separately, a 9,000-contract block of Oct 47.5 puts traded at $1.04 on AMEX. A source tells us the block was an outright seller. Looks opening. 10,200 traded. Players are still jockeying for position in anticipation of Mosaic’s next move heading into an Oct 6 Analyst Day and implied volatility has risen 10 percent to 63 on the session.

Bearish Flow

RIM (RIMM) loses $1.05 to $20.85 and one strategist sells 19,340 Jan 22.5 puts on the Blackberry-maker at $4.05 to buy 25,292 Jan 20 puts at $2.77. The move likely rolls some of a position opened a couple of weeks ago, when a Jan 15 - 22.5 put spread was bought on RIM at $2.30, 38690X (see 9/16 color). Looks like some of the spread was closed out one week ago (see 9/22 color). Now the Jan 22.5s, which were bought at $2.85 on 9/16, are being sold-to-close today to $4.05. The strategist is also bracing for further downside and opening in the Jan 20s. RIM saw a pop Tuesday on unsubstantiated chatter Icahn was taking a stake in the company (see 9/27 color). It is down over the past two days, however, and weighed down yesterday by news is selling a new Kindle Fire tablet for $199. RIMM is poised to set a new 52-week closing low Thursday. The previous is $21.26 set on 9/22.

Implied Volatility Mover

Focus Media (NASDAQ:FMCN) is under pressure and implied volatility in the options on the Hong Kong-based ad agency is ripping higher Thursday. The stock is down $3.17 to $21.37 and options volume is 31,000 contracts (13K calls/18K puts). Normal volume through midday is about 4,000. Oct 20 puts are roughly 8 percent OTM and expiring in 22 days. 5,580 contracts traded. Oct 21, 22, 23 and 26 calls are the next most actives. Implied volatility in FMCN is up 33 percent to 68, possibly in reaction to the volatility in a number of Chinese stocks today. There are reports the DOJ and SEC are investigating some of the US-listed companies related to accounting irregularities (YOKU, SINA, SOHU, QIHU are seeing big percentage losses).

Unusual Volume Movers

Bullish flow detected in Kinross Gold (NYSE:KGC), with 44845 calls trading, or 3x the recent avg daily call volume in the name.

Bearish activity detected in Avago Technologies (NASDAQ:AVGO), with 5546 puts trading, or 12x the recent avg daily put volume in the name.

Bullish flow detected in STEC Inc (NASDAQ:STEC) with 12454 calls trading, or 4x the recent avg daily call volume in the name.

Meanwhile, high options volume is being seen in Netflix (NFLX), (NASDAQ:BIDU), and AMD.