Friday Options Recap

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Includes: AAPL, AMRN, BAC, DRYS, ELN, GE, HTZ, MU, SHAW
by: Frederic Ruffy

Sentiment

The Dow Jones Industrial Average clings to a small gain late Friday, but is in danger of snapping the seven-day winning streak following a round of lackluster economic news. While the latest Consumer Price Index [CPI] showed a .4 percent uptick for Feb and was in-line with expectations, industrial production was flat last month (vs. expectations for a .4 percent increase) and the U of Michigan Consumer Sentiment is at 74.3 in mid-March, from 75.3 in late-Feb and below expectations of 75.8. Yet, stocks didn’t waver much on the data and were sporting modest gains through midday. From there, the action stalled and trading is narrow despite high volumes related to the Quad Witch expiration. Crude oil is getting some attention after gaining nearly $2 to $107 per barrel. Gold has rebounded from early losses and is now down just $2 to $1657.5 an ounce. Meanwhile, the Dow Jones Industrial Average is up 8 points. The tech-heavy Nasdaq gained 1.5. CBOE Volatility Index (.VIX) is off .75 to 14.67 and has plummeted 14.3 percent on the week. Trading in the options market is active due to the expiration. 8.9 million calls and 6.5 million puts traded across the exchanges so far.

Bullish Flow

Eight of the ten most active equity options in the first 15 minutes Friday are in BofA (NYSE:BAC) (the other two are calls on AAPL). The six most active stock options so far are calls on the bank. Shares are up 17 cents to $9.40 and extending the winning streak to four days and 17.5 percent. Apr 9s, which are now 40-cents in-the-money, have traded 16,800 contracts and possibly seeing some liquidating trades, as 68 percent traded on the bid. Mar 9 calls are likely seeing some closing activity as well. May 10, May 11, Apr 10 and Weekly (3/23) 10 calls on BofA are seeing interest early Friday and levels of implied volatility are up 1.5 percent to 40, up from 35 a week ago, but below this week’s high of 43 seen mid-week. Share volume is already 93 million (expected is 23 mln). Options volume running 4X the usual. 123,000 alls and 43,000 puts so far.

Hertz (NYSE:HTZ) is drifting 12 cents higher to $15.16 on relatively light volume of 1.7 million shares. Typical volume through midday is 3.3 million. Yet, options volume is 2.5X the daily average, being driven by expiration-related activity. Looks like March 13 and 14 calls are being offset to open new bullish positions in April. 7,800 April 15 calls have traded on Hertz so far. The top trade is a 3640-lot for 80 cents per contract when the market was 70 to 80 cents. Open interest is 5551. Total options volume is 12,000 calls and 1,100 puts. Implied vols in HTZ options moved up 8 percent to 39. No news on the ticker. Shares have performed well of late and are up 42.3 percent from three months ago. Opening activity in April 15s seems to reflect expectations for additional gains over the next few weeks.

Bearish Flow

Shaw Group (NYSE:SHAW) sees relative weakness on higher normal volume of 625K shares. The stock is down 57 cents to $31.70 and options volume on the Baton Rouge, La. construction company is running 2.5X the daily average, being driven by Apr 32 call writes. More than 4,000 now traded. The top trade is 1200-lot on the $1.55-bid. Implied volatility is flat at 32.5 and some investors might be selling calls on the view the upside is limited over the next five weeks. Shares are up 40 percent since earnings were last reported on 12/20. The company reports again on Mar 29.

Implied Volatility Mover

Heavy trading continues in Amarin (NASDAQ:AMRN). The stock is up $1.14 to $10.05 on volume of 8.8 million shares, which more than 5X the expected volume for the biotech. AMRN has risen 41.1 percent since Tuesday amid active trading in both shares and options. Another 18,000 calls and 12,000 puts traded in the name today. The top trades include an apparent Apr 8 – 12 strangle, possibly sold to open at $1.20, 5215X. Apr 9 puts, Apr 10 puts, and Apr 10 calls are seeing interest as well. Expiring Mar 9 and 10 calls are also among the most actives and levels of implied volatility are moving up 11 percent to 104, as some players in the options market seem to be anticipating additional volatility in AMRN shares in the weeks ahead. The heightened activity is probably related to the company’s AMR101 heart drug, which is facing an FDA review.

Unusual Volume Movers

Bullish flow detected in Elan (NYSE:ELN), with 21887 calls trading, or 4x the recent avg daily call volume in the name.

Bullish flow detected in Hertz (HTZ), with 11962 calls trading, or 4x the recent avg daily call volume in the name.

Bullish flow detected in Dryships (NASDAQ:DRYS), with 31210 calls trading, or 2x the recent avg daily call volume in the name.

Meanwhile, unusually high options volume is being seen in BofA (BAC), GE (NYSE:GE), and Micron Technology (NASDAQ:MU).