Tuesday Options Recap

 |  Includes: ARCH, FSLR, YHOO, ZNGA
by: Frederic Ruffy


Stock market averages are lower on concerns about the global economy. Data released Tuesday morning showed Retail Sales up a weaker-than-expected .4 percent in January, which was .3 percent less than expected. Meanwhile, the euro is back under pressure – down .7 percent to 1.31 against the dollar – amid persistent concerns Greece won’t cut spending enough to avoid a messy March debt default. Moody’s rating cuts of six European countries late Monday along with warnings of further revisions add to the worries. Yet, Eurozone stock benchmarks finished only modestly lower and volatility remains on vacation from Wall Street as well. The Dow Jones Industrial Average is down 67 points and the tech-heavy NASDAQ lost 17. CBOE Volatility Index (.VIX) seized 1.60 points to 20.64. Trading in the options market is busier than yesterday, but volume totals are unimpressive. 9.3 million calls and 6.7 million puts traded across the nine options exchanges so far.

Bullish Flow

Arch Coal (ACI) loses 47 cents to $13.39 after Argus downgraded the stock to Hold from Buy. Options order flow on the coal producer is bullish, however, as 15,000 calls and 3,100 puts traded in the name. Recent trades include a buyer of 5,000 March 14 calls for 57 cents per contract. The calls are tied to 200K shares at $13.26. 8,012 March 14 calls now traded on Arch Coal. Volume in July 17 calls is approaching 4,000. ACI is down today and on a three-day 14.2 percent slump since earnings were reported on 2/10. Today’s low of $13.26 per share is within cents of the 52-week low of $13.22 set on 10/3. Today’s call buyers are possibly looking for those lows to hold and for ACI to stage another rebound in the weeks ahead.

Yahoo (NASDAQ:YHOO) volume and volatility are elevated today on reports deal talks are dead. There had been some speculation that Alibaba, Softbank and Yahoo were working on a complex agreement that would potentially give Yahoo cash for its 40 percent stake in Alibaba. Those talks have ended, according to All Things D. Shares are down 97 cents to $15.15 and heavy volume of 57 million, which is more than 4X the typical turnover. 344,000 options traded on the Internet giant, which is 3X more than normal. The top trade seems to be a contrary play, as a Jul 14 – 16 bullish risk-reversal was apparently opened for 8 cents, 25000X. It might roll out of a position in 20000 April 16 calls, which traded within minutes of the bullish combo at 52 cents. Meanwhile, implied vols are lifting an impressive 40 percent to 35.5.

Bearish Flow

Hefty spread in First Solar (NASDAQ:FSLR) after one strategist bought roughly 11,200 Mar 32 – 39 put spreads on the stock for $2.88. The position looks opening and tied to 75K shares at $38.80. FSLR is on an impressive 3-day 21.6 percent slide following cautious commentary from analysts. Earnings expected around Feb 23 (unconfirmed).

Implied volatility Mover

Zynga (NASDAQ:ZNGA) sees a flurry of activity ahead of this afternoon's earnings release. Shares are up $1 to $14.42 and setting new highs today after a 70 percent surge over the past month. Share volume is 22.5 million and almost 2X more than normal. Meanwhile, options volume is running 5X the daily average. 86,000 puts and 69,000 calls traded on the San Francisco, CA social games and media company. The top trade is a decidedly bearish play after one strategist bought a Feb (2X1) 12 - 13 put ratio spread for even money, 8750X and possibly looking for the stock to fall back towards $12 (-16.7%), but not dramatically below that level, through the end of the week. The next biggest trade is a Feb 13 - 12 - 11 put tree on ISE and data is indicating a closing trade. Meanwhile, implied volatility in ZNGA options is moving up 8 percent to 122 and setting new 52 week highs along with the new highs in the stock price Tuesday. Today's fourth quarter earnings release marks the first report since the company went public.