Thursday Options Recap

 |  Includes: JPM, QRVO, SINA
by: Frederic Ruffy


Stock market averages have battled back from early weakness and are trading mixed late Thursday. Losses across the Eurozone set the table for morning weakness on Wall Street. Spain’s IBEX gave up 3.7 percent amid ongoing concerns about European debt problems. In the US, the data included a report on Weekly Jobless claims, which showed little change at 401K for the period ended Oct 8. Meanwhile, the nation’s Trade Balance narrowed to $45.6 billion in August and a bit more than expected. The data seemed to have relatively little impact, but the financials fell on disappointing earnings from JP Morgan (NYSE:JPM) (see today’s Bearish Flow). JPM is down 4.5 percent and the biggest loser in the Dow Jones Industrial Average. BofA lost 4.4 percent – the second biggest loser in the Dow -- and the industrial average is off 20 points. However, the tech-heavy NASDAQ has recovered early losses and is up 16.7 points. With forty-five minutes left to trade, CBOE Volatility Index (.VIX) is down 64 points to 30.62 and more than 2 points off session highs. Trading in the options market is light, with 5.8 million calls and 6.6 million puts traded so far.

Bullish Flow

SINA shares are rallying and options on the Chinese company are actively traded today on reports government officials are encouraging the use of Weibo and other microblogs for information disclosure. Weibo is Sina's social networking service similar to a Twitter and Facebook. China Central Television apparently aired the story last night (unconfirmed). SINA is up $14.58 to $93.06 and near session highs. The five most actives in SINA are Weekly options that expire after tomorrow. 3,520 Weekly 90 puts changed hands. Weekly 85 calls, 90 calls, 95 calls, and 85 puts are actively traded as well. 36,000 calls and 24,000 puts traded on the stock, which is 2.5X the daily average. Speculators are also active in the October 80 calls, 90 calls, 92.5 calls and 80 puts. The stock has already surged 37 percent off the 52-week lows seen Monday, but is still almost 37 percent below the highs seen in mid-April when shares fetched more than $147.

Bearish Flow

JP Morgan loses 5.3 percent to $31.43 and is the Dow's biggest loser today after the bank reported third quarter earnings that topped expectations, but an accounting shift related to debt was one reason for the beat. Fees showed a sharp drop and return on equity was 9 percent, from 12 percent in the Q2. Options are actively traded on the results. 47K calls and 69K puts so far. Oct 30 puts, which are now 4.6 percent OTM, are the most actives. 12,500 traded. The top trade is a 550-lot at the 43-cent ask price. Implied vols in JPM is steady around 51 and not seeing the typical post-earnings crush. Given that JP Morgan is the first of the major banks to release Q3 earnings, some investors might see the disappointing results as a negative harbinger of things to come. Oct 30 puts are being bought on the view other names in the sector will also disappoint between now and next week's expiration. GS and BAC will be closely scrutinized when results are released on Oct 18.

Implied volatility Mover

Triquint (TQNT) shares are rallying and implied volatility in the options on the chipmaker is elevated after a breakdown of the new iPhone uncovered two chips provided by the company. The story circulated midday and was mentioned on CNBC. Shares are up $1.41 to $7.34 and options volume on the stock includes 18,000 calls and 3,280 puts. Oct 6, Oct 7, Nov 7 and Nov 8 calls are the most actives. Heavy trading has lifted implied volatility in TQNT options by 21 percent to 85 and not far from the 52-week high of 88 set on 10/3.