Friday Options Recap

by: Frederic Ruffy


Trading is slowing ahead of the holiday weekend. The day’s economic news was mixed. A report released early Friday showed Personal Incomes and Spending both increasing by .1 percent in November. Economists were expecting to see gains of .2 percent and .3 percent, respectively. However, Durable Goods unexpectedly rose 3.8 percent during that time (vs. 2 percent consensus) and New Home Sales improved to a better-than-expected annual rate of 315K (vs. 310K consensus). Trading was uneventful across the Eurozone and market action in the commodities pits is lackluster as well. Crude oil edged up 19 cents to $99.72 and gold dipped $2.5 to $1608. The Dow Jones Industrial Average is up 94 points and the tech-heavy NASDAQ has added 16. CBOE Volatility Index (.VIX) continues its grind lower and is down another .18 to 20.98. With two hours left to trade, total options volume is a light 3.8 million calls and 2.8 million puts.

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Bullish Flow

Mosaic (NYSE:MOS) adds 44 cents to $52.06 and options on the stock are actively traded today. 17,000 calls and 4,175 puts so far. The expiring Weekly 52.5 calls, which are 44 cents out-of-the-money and coming off the board today, are the most actives. 3,560 traded against 351 in open interest. The market is 9 to 13 cents. Jan 52.5, Jan 57.5 and next weeks (12/30) 55 calls are the next most actives. Implied volatility is up 6.5 percent to 41.5, as upside call buyers seem to be dominating the flow in the stock during the first two hours of Friday’s session.

Bearish Flow

Chelsea Therapeutics (NASDAQ:CHTP) adds 3 cents to $5.25 and options volume on the biotech is running 3X the daily average, being led by a 1610-lot of Mar 4 puts for $1.05 on ISE. It's an opening buyer, according to data from the exchange. 2,944 traded total. Open interest is already 3,050 and the largest position in the name. Mar 4 puts, if bought for $1.05, have a downside breakeven at the expiration at $2.95 per share, which represents a 43.8 percent nosedive over the next 84 days. The stock saw volatile action during the first few months of 2011, but haven't done much of late. Shares are at the same levels today as they were in June. Implied vols are steady around 56 and today's put buyers are perhaps hedging their bets ahead of an expected Feb 2012 FDA meeting related to Chelsea's NORTHERA drug for Parkinsons patients.

Implied Volatility Mover

Rambus (NASDAQ:RMBS) is a big mover today. Shares are up $1 to $8.32 after the chipmaker signed a licensing agreement with Broadcom (BRCM). Meanwhile, 7,730 calls and 1,680 puts traded on RMBS so far today. Jan 9 calls, which are now 8.2 percent OTM and expiring in four weeks, are the most actives. 2,670 traded. Jan 7.5 and Feb 9s are seeing interest as well. Heightened activity and the big move in the underlying has helped send implied volatility in options on the stock up 16.5 percent to 53.

Unusual Volume Movers

Supervalu (NYSE:SVU) options volume is running 11X the (22-day) average, with 27,000 contracts traded and put activity accounting for 98 percent of the volume.

Sandridge Energy (NYSE:SD) options volume is 2.5X the average daily, with 43,000 contracts traded and call volume representing 79 percent of the activity.

Mead Johnson (NYSE:MJN) options volume is running 3.5X the average daily, with 18,000 contracts traded and put volume representing 61 percent of the total volume.

Increasing options activity is also being seen in Radioshack (NYSE:RSH), Cameron International (NYSE:CAM), and Chico’s FAS (NYSE:CHS).