Thursday Options Recap

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 |  Includes: CS, F, NFX, RDN
by: Frederic Ruffy

Sentiment

Stock market averages are sporting modest losses following a round of mixed earnings and economic news Thursday. Data released before the bell showed Durable Goods up 3 percent in December and 1 percent better-than-expected. However, Weekly Jobless claims ticked higher to 477K and 2,000 more than expected and the List of Leading Economic Indicators was up just .4 percent last month, which was .3 percent less than expected. However, the Dow Jones Industrial Average was holding a modest gain into midday with help from a 2.3 percent post-earnings advance in Caterpillar. Netflix, JetBlue and Nokia are also up on profit results. AT&T (NYSE:T) and Sandisk (SNDK) are seeing post earnings. Stocks faltered in the second half of trading, however, and mixed trading turned to modest market weakness on concerns EU officials aren’t making headway in averting a Greek debt debacle. The euro, which traded as high as 1.3183 early, dipped back to 1.31 against the buck. Crude oil gave back most of its early gains and slipped back below $100. Gold dipped $10 off session highs and is now up $21.50 to $1721.60 an ounce. Meanwhile, the Dow Jones Industrial Average is down 50 points and 133 points off its best levels. The NASDAQ lost 20. With thirty minutes left to trade, CBOE Volatility Index (.VIX) is up .80 to 19.11. Trading in the options market is running at its best levels since Monday. 8.3 million calls and 7.5 million puts traded on the exchanges so far.

Bullish Flow

Newfield Exploration (NYSE:NFX) loses $1.05 to $40.23 and one strategist sold 7,000 Mar 35 puts on the stock at 55 cents per contract to buy 3,500 Mar 45 calls for 75 cents. The 1X2 bullish ratio risk-reversal looks tied to 193K shares at $40.71 and comes after several months of losses in shares of the Woodlands, TX oil and gas company. NFX is down 47.1 percent since March. Today’s combo trader is probably looking for the stock to hold above $35, possibly rally beyond $45, through mid-March. The company presents at a Credit Suisse conference on Feb 7 and earnings come into play on Feb 21.

Speaking of Credit Suisse (NYSE:CS). Shares are up 34 cents to $26.95 Thursday morning and one player buys 4532 Jun 33 calls on the bank for 60 cents per contract. 5,050 now traded against just 30 contracts in open interest. CS and other European banks have performed better lately amid diminishing concerns about the Eurozone debt mess. The stock is up 14.9 percent year-to-date. Still, Jun 33 calls on CS are 22.4 percent out-of-the-money with a .19 delta. Shares last traded north of $33 on 8/3/2011.

Bearish Flow

Ford Motor (NYSE:F) adds 7 cents to $13 and morning options trades on the automaker include a Mar $12 – $14 bearish risk-reversal, bought for 8 cents, 10000X. Open interest is sufficient to cover, but this might be an opening play, as the stock is precisely midway between the two strikes and there is nothing in the historical data to indicate the same combo trade in substantial sizes before. A shareholder might have initiated the trade to collar Ford ahead of the company’s earnings release, due out tomorrow morning.

Implied volatility Mover

Radian (NYSE:RDN) loses 19 cents to $2.69 and a 1250-lot of Jan 2 puts traded on the stock for 75 cents when the market was 65 to 75 cents. 1765 traded and today’s flow probably adds to positions from yesterday, when open interest in the contract increased by 4,747 to 7,500 and now the largest position in the Philadelphia-based credit insurance company. Implied volatility is up 3.5 percent to 95, as shares tick lower for a fourth day this week. RDN is down almost 13 percent since Friday. Earnings slated for Feb 23.