Sentiment
Market action is sluggish Monday on worries about Greece. The euro was testing the 1.30 level against the buck Monday morning amid concerns won’t reach a deal with creditors to avoid a nasty debt default. However, the euro had battled back to 1.3125 through midday and European stock benchmarks finished with only slim losses. With no economic data or earnings of broad significance to guide morning trading, market action was similarly uninspired. With an hour left to trade, the Dow Jones Industrial Average is down 35 points and about midway between today’s narrow 68-point range. The tech-heavy NASDAQ gave up 8 points. CBOE Volatility Index (.VIX) is up .80 points to 17.90. Trading in the options market is very light today. 5.2 million calls and 4.4 million puts traded across the exchanges so far.
Bullish Flow
Dryships (DRYS) sees a second day of increasing volume. Shares are up 20 cents to $2.63 on volume approaching 14 million. Typical volume in the first two hours is about 2 million shares. Meanwhile, options activity is running 3.5X the daily average. 21,000 calls and 1,245 puts traded on the stock. Today’s flow seems to include buyers and sellers. Feb 2.5 calls, which are now 13 cents in-the-money and expiring in 11 days, are the most actives. The top trade is a 411-lot on the 15-cent bid and is possibly a liquidating trade. Mar 2.5, Feb 3, Mar 3, and Jan 2.5 calls are the next most actives and levels of implied volatility are moving up 1.5 percent to 84. DRYS saw a pop late Friday on increasing volume as well. The gains in the stock and high volume are possibly related to news today that the company’s Oil Drill UDW unit struck a drilling contract with Norwegian Continental Shelf, which will add about $653 million in revenues to the backlog.
Bearish Flow
Vulcan Materials (VMC) is up 4 cents to $44.83 and early options trades on the stock include a multi-exchange sweep of 1,063 Feb 45 puts for $1.80 per contract. 3,070 now traded against 106 in open interest. Data from the ISE indicate opening buyers and implied volatility in the options on VMC is up 21 percent to 41. Some investors might be hedging their bets ahead of a Feb 15 earnings report. The stock has surged 33.8 percent since Martin Marietta made an all stock hostile bid for the maker of sand, gravel, and other construction-related materials. VMC has thus far rejected the offer. Martin Marietta might shed light on its future plans when the company reports earnings tomorrow.
Implied volatility Mover
MEMC (WFR) sees a morning spike on volume approaching 4 million shares and call action is heating up in the silicon wafer maker. 10,000 call options and 500 put options traded in the name so far. Shares are up 20 cents to $5.38 and near the best levels of the day. Options order flow includes a multi-exchange sweep of 1,570 contracts for 14 cents when the market was 12 to 14 cents. Another 1,250 traded for 13 cents when the market was 11 to 12 cents. Feb 6 calls on WFR are 12.4 percent out-of-the-money and expiring in 11 days. Volume is nearly 6,000 contracts. Mar 5 and 6 calls are seeing interest as well and levels of implied volatility are moving up 10 percent to 77. No news on the stock, which is on a four-day 18 percent winning streak to start the month of February. Speculative call buying comes ahead of the company’s Feb 15 earnings report. MEMC pre-announced on Jan 18.
