Wednesday Options Recap

by: Frederic Ruffy


The churn continues Wednesday. The only economic stat of the day showed Existing Home Sales increasing to an annual rate of 4.57 million in January. The number was better than the 4.38 million in December, but also shy of economist estimates of 4.63 million. Meanwhile, trading across the Eurozone was sluggish again Wednesday despite the EU bailout of Greece announced the day before. Questions linger about the full impact of the crisis on the European economy and now, with crude oil percolating to more than $105 per barrel, how the region’s economy will fare after stricter budget cuts are implemented. In the US, the day’s other news included a disappointing profit report from Dell (NASDAQ:DELL), which is off nearly 6 percent. Walmart (NYSE:WMT) is in the midst of a two-day 6.5 percent losing skid after its results were released Tuesday morning. Crude oil is now down a dime to $106.15, but gold staged a late-day surge and is up another $21 to $1779 an ounce. The Dow Jones Industrial Average has traded in a 63-point range and is down 23 points. The tech-heavy NASDAQ lost 12.7 points. With less than an hour to trade, the CBOE Volatility Index (.VIX) is flat at 18.19 amid light volume in the options mart. 7.2 million calls and 5.7 million puts traded across the exchanges so far.

Bullish Flow

Fuel Cell (NASDAQ:FCEL) adds 22 cents to $1.69 on heavy volume of 2.5 million shares, which is significantly greater than typical volume of 325K shares. Meanwhile, 5,730 calls and 90 puts traded in FCEL. The activity is concentrated in Jul 2 calls. 5,300 changed hands (96 percent Ask) against 981 in open interest. A 4980-contract block traded for 25 cents when the market was 15 to 25 cents. Bullish trading in FuelCell comes the day after a Gigaom article mentioned that Apple might be building a data center using solar and fuel cells. The company today announced a German-based joint venture with Fraunhofer to build stationary power plants. The stock has now rallied over 70 percent month-to-date.

Mosaic (NYSE:MOS) adds $2 to $58.91 in the first fifteen minutes of trading Wednesday, on heavy volume of 2.3 million shares, which compares to expected volume of less than 500K. Options action might be heating up as well. Weekly 60 calls are the most actives. 1,362 traded against 1,018 in open interest. The company hosts an Analyst Day today.

Bearish Flow

Big BofA (NYSE:BAC) again today after 62,500 April 8 calls were sold at 57 cents per contract. Like yesterday (see 2/21 color), the flow appears to be liquidating trades and possibly exiting positions opened earlier this month. BAC is down a nickel to $8.06 Wednesday. But $8 calls on the stock are six cents in-the-money after the stock’s two month 53.9 percent surge.

JP Morgan (NYSE:JPM) loses 24 cents to $38.22 and 25,500 April 39 calls are sold on the stock at $1.16 per contract. Like the big prints in BAC this week (see 2/21 and 2/22 color), the activity might close a position opened a few weeks ago, when 12,500 traded for $1.24 on 1/31 and 13,000 for $1.45 on 2/1. However, unlike BAC, the liquidating trades in JPM seem to be for a loss after a 2.4 percent advance in shares. The move wasn't been sufficient enough to offset the negative impacts from theta and vega.

Implied volatility Mover

Williams Companies (NYSE:WMB) is off 12 cents to $29.34 and levels of implied volatility in the options on the stock are moving higher today ahead of earnings. The natural gas producer reports after the closing bell. The top trade on the stock so far is Mar 29 - 31 bearish risk-reversal for 6 cents, 2700X on ISE. Data indicate calls were sold to buy puts and open a new position. Beyond that, the action has been in smaller lots and players are also taking positions in Mar 30 calls, which were active yesterday and have traded 4,270 contracts today. Meanwhile, implied volatility in the options on WMB is on the move -- up 18.5 percent to 27. The stock sometimes sees volatility around profit reports. The average daily post-earnings moves over the past four quarters is 5.8 percent, including a 10 percent slide on 8/4/2011.