Thursday Options Recap

 |  Includes: ASNA, FSLR, LB, MWW
by: Frederic Ruffy


Stock market averages are holding modest gains with help from better-than-expected February sales numbers. Both Ford (NYSE:F) and GM are trading higher today after the automakers reported improved numbers. Macy’s (NYSE:M), Ann Taylor (NYSE:ANN), and Gap Stores (NYSE:GPS) are among the individual retailer names seeing strength on February same store sales results. The other economic news was less inspiring. While jobless claims fell a bit more than expected last week, January spending and incomes fell short of expectations. January construction spending and February ISM manufacturing were also below forecasts. Trading was relatively uneventful on the other side of the Atlantic, but France’s CAC Index gained 1 percent to help pace a modest advance across Eurozone equity markets. Crude oil is getting some attention, as prices are moving beyond $110 per barrel late in electronic trading Thursday on unconfirmed reports a Saudi pipeline blew up. The Dow Jones Industrial Average faltered as crude rose and is now up just 6 points. The NASDAQ is holding a 19-point gain. CBOE Volatility Index (.VIX) is down .66 to 17.77. Trading in the options market is running about the typical levels. 7.5 million calls and 6.2 million puts traded across the exchanges so far.

Bullish Flow

The Limited (LTD) loses 39 cents to $45.93 and one strategist sells 12000 April 40 puts on the stock to buy 6,000 April 47 – 50 call spreads. 32.5 cents was paid on the three-way, which looks opening and tied to 288K shares at $45.93. Shares hit a morning low of $45.38 after the retailer reported an 8 percent increase in February same-store sales. However, the stock is now 1.7 percent off those lows and up 14.3 percent year-to-date. LTD notched a new 52-week high of $47.11 Tuesday, just a few trading days after earnings were last reported (2/22).

Ascena Retail Group (NASDAQ:ASNA), a Suffern, NY women's apparel retailer, is seeing higher options volume ahead of earnings. Shares are up 40 cents to $39 and the volume of 8,560 calls and 2,570 puts is 10X the daily average for the name. The top trade is a Mar 38 - April 39 call spread for 30 cents, 3480X. The spread might roll a position in Mar 38 calls opened on 2/21, when 3,500 traded at a VWAP of $1.75, and 2/24, when 1280 traded for $1.51. If so, the position is being sold to close at $1.95. A new position in April 29s initiated for $2.25 per contract. The next biggest trade is a 1000-lot of Mar 36 puts on the stock for 55 cents, which might be a bet that shares will give back some of the 30.7 percent year-to-date surge when the company reports -- today after the closing bell.

Bearish Flow

First Solar (NASDAQ:FSLR) is extending its post-earnings slide. Shares are off $1.79 to $30.51 and down 16.2 percent since earnings were reported Tuesday. Trading in the options on the Tempe, AZ solar technology company is brisk again today. 86,000 puts and 24,000 calls so far. The top trades are part of a spread. The investor sold 5,150 Mar 27 – 34 put spreads for $3.60 to buy 6,545 March 30 puts for $1.53. The activity in the March 30s looks opening. The Mar 27 – 34 put spread probably closes some of the positions opened the day before earnings were reported when one investor bought 12,500 for $1.80 (see 2/27). That spread, in turn, was rolling out of a March 32 – 39 put spread, which was sold at $3.58 on 2/27 to close a position opened for $2.88 (see 2/14 color). Today’s adjustment, which opens in the March 30 puts, appears to express the view that the stock could suffer additional losses over the next two weeks.

Implied volatility Mover

Implied volatility in the options on Monster Worldwide (NYSE:MWW) is ripping higher today after the company’s CEO made statements indicating the company is exploring strategic alternatives (Briefing). Shares are up 67 cents to $7.61 on volume of 7.3 million shares, which is nearly 6X the expected volume for the stock. Meanwhile, 15,000 calls and 2,300 puts traded on the stock, or 16X the daily average. Mar 7 and 8 calls are the most actives and speculative activity is sending levels of implied volatility in MWW options up 74 percent to 63.5. The job company is presenting at a Robert W Baird conference today.