Monday Options Recap

by: Frederic Ruffy


Market action is mixed and the underlying tone is a wait-and-see feel ahead of a busy economic calendar this week. Retail sales numbers tomorrow morning and FOMC rate announcement Tuesday afternoon could add a bit of volatility to the mix. The Quadruple Witch expiration later this week will affect trading as well. Today, some of the early focus was on China’s trade deficit, which ballooned to decade highs in February and raised some concerns about slowing in the global economy. However, trading was orderly in Hong Kong and stock benchmarks saw narrow trading across Europe as well. Gold is down $103. To $1701.2 an ounce and a $1 loss in crude oil is hurting commodity-related names as well. However, the Dow Jones Industrial Average has been holding a modest gain throughout the session and is up 49 points heading into the close. The tech-heavy Nasdaq lost 4.3 points. The CBOE Volatility Index (.VIX) hit a low of 15.23 and is apparently being affected by some adjustments to the “fear gauge," which occurs eight days before the expiration. VIX is down 1.21 to 15.90 amid light volume in the options pits. 8 million calls and 5.1 million puts traded across the exchanges so far.

Bullish Flow

One savvy options player appears to have scored a big win in Youku (NYSE:YOKU) after the Chinese Internet TV company announced plans to acquire competitor Tudou Holdings. YOKU is up $6.90 to $31.92 and the Mar 28 - 30 call spread that was bought Friday for 50 cents, 9,400X, is now in-the-money and recently trading at $1.65 (see 3/9 color). It's apparently being left open for now. Meanwhile, today's options order flow in YOKU includes 24,000 calls and 25,000 puts. March 30 calls and 23 puts are the most actives. Levels of implied volatility have eased 4% to 88.

Agnico Eagle Mines (NYSE:AEM) is down 95 cents to $35.41 on weakness in the sector today after gold slipped $8 to $1703.50 an ounce. Options order flow in the Toronto-based miner is noteworthy, as call volume is outpacing put activity by a ratio of more than ten-to-one and levels of implied volatility moved up 7% to 36. 7,700 calls and 735 puts traded on the stock so far. March 37.5 call options, which are 5.9% OTM and expiring at the end of the week, are the most actives. 1,675 traded. Mar 35, Apr 40 and Apr 42.5 calls are busy as well.

Bearish Flow

VIX hit 15.23 today? It’s back up to 16.34, but the VIX June futures are around 25.5 and September is 28. Very steep term structure in SPX options. Recall that Friday, we discussed the big buyers of Apr 19 puts on the index. The actual volatility of the S&P 500 is creeping higher, but still at just 10%. So, the April 19 put buyer is probably playing the term structure (vols are much lower in the front-month) and also the fact that actual remain very low. It will certainly be interesting to see where VIX settles at the March and April expiration, which are in 8 days and 36 days, respectively.

Implied Volatility Mover

Pre-earnings options action is picking up in Clean Energy Fuels (NASDAQ:CLNE). Shares are up 43 cents to $21.20 and touching new 52-week highs ahead of the results, due after the close today. 3,280 calls and 2,400 puts traded in the name. The activity has been in smaller lots. Mar 23 calls and Mar 20 puts are the most actives, with more than 700 traded in both contracts. Players are also showing interest in Mar 19 puts, April 22 calls and Mar 21 puts in CLNE and levels of implied volatility moved up 15% to 66 ahead of the results. CLNE has seen average daily post-earnings moves of 6.3% during the previous four quarters. The Mar 21 straddle is currently trading for $1.65 and 7.8% the spot. Shares fell 7% after earnings were last reported, but have surged nearly 90% since that time on hopes for greater government support for natural gas vehicle production.

Unusual Volume Movers

Bullish flow detected in Accretive Health (AH), with 2,790 calls trading, or 4x the recent average daily call volume in the name.

Bullish flow detected in Willis Group Holdings (WSH), with 2,036 calls trading, or 12x the recent average daily call volume in the name.

Bullish flow detected in Changyou (NASDAQ:CYOU), with 7,019 calls trading, or 32x the recent average daily call volume in the name.

Meanwhile, unusually high options volume is being seen in Oracle (NASDAQ:ORCL), Garmin (NASDAQ:GRMN) and Market Vectors Gold ETF (NYSEARCA:GDX).