Wednesday Options Recap

 |  Includes: KGC, TSN, YHOO
by: Frederic Ruffy


Stock market averages opened higher and were able to build on the morning gains through afternoon trading Wednesday. Economic data was in focus early after ADP reported that the US economy added 216,000 private sector jobs in February, which was in-line with expectations and comes two days before the Labor Department releases its key figures. Stocks also saw a lift mid-morning on reports the Federal Reserve is mulling another bond buyback program similar to operation twist. At the same time, the euro is steady today and edged up .3 percent on the dollar following reports that Greece is making progress is its Private Sector Involvement [PSI] bond renegotiations. The overall news flow seems to have eased some of the anxiety that sent stocks tumbling the day before. After a 204-point slide Tuesday, the Dow Jones Industrial Average has recaptured 94 points. The NASDAQ gained 24 points. CBOE Volatility Index (.VIX) dropped 1.49 to 19.38 amid very light volume in the options market. 6.6 million calls and 5.2 million puts traded across the exchanges so far.

Bullish Flow

Tyson Foods (NYSE:TSN) adds 24 cents to $19.42 and recent options trades on the poultry producer include a multi-exchange sweep of 3075 Apr 20 calls for 40 cents when the market was 30 to 40 cents. April and October 21 calls on TSN are seeing interest as well. The stock was the subject of bullish order flow Tuesday and the activity created 2,854 contracts of new open interest in TSN calls (compared to +230 puts). Implied volatility in options on Tyson has eased a bit today, down 1.5 percent to 23.5, but it looks like call buyers are dominating the activity in the name for a second day (see 3/6 color), perhaps they’re betting that the two-week 4.1 percent advance in the stock isn’t just chicken feed.

Kinross Gold (NYSE:KGC) sees a flurry of call options activity Wednesday. Shares are up 12 cents to $10.69 and options volume on the stock includes 37,000 calls and fewer than 2,000 puts. April 11 and 12 calls are the most actives and the volume is being driven by large and small lots trading predominantly at the offer. The biggest is 3000 Apr 12 calls for 22 cent per contract The market is now 24 to 25 cents. Implied vols are up 10 percent to 42.5, but with no news on the ticker today. Gold gained $12 to $1684 an ounce. KGC hasn’t performed well lately. Shares are down 39 percent since August. Possible bottom-fishing in the name.

Bearish Flow

Yahoo (NASDAQ:YHOO) adds 23 cents to $14.64 and a 10,000-contract block of July 12 puts trades on the Internet giant at the 29-cent asking price this morning. 19,310 traded against 12,517 in open interest. Goldman Sachs was out with a research note recommending April 13 – 15 put spreads on Yahoo today, due to limited strategic options and risks to downside estimates. The firm likes the spread for an 83-cent debit. The market is now 65 cents.. Meanwhile, AllthingsD is reporting today that the company’s highly ranked product executive Bill Shaugnessy is leaving Yahoo. The stock has underperformed lately, down 5.4 percent since January. 27,000 puts and 17,000 calls traded on the stock through midday.

Implied volatility Mover

VALE loses 38 cents to $22.98 early Wednesday and it looks like an April 23 – 24 put spread is sold on the Brazilian metals company at 62 cents, 6250X. It might close, as both legs of the spread are now in-the-money after a three-day 10.5 percent slide in the underlying. The stock was under fire Tuesday on reports the company has set aside money to fight the government over taxes. Implied volatility in the options increased by 19 percent yesterday and are up another 4.5 percent to 36 today.