Monday Options Recap

 |  Includes: BAC, ILMN, VXX
by: Frederic Ruffy


Stock market averages are holding modest gains in active trading Monday. Economic news is sparse and included just one sole stat on housing. NAHB Homebuilder Index was unchanged at 28 in March. Economists were expecting an uptick to 31. The data didn’t move the markets much and stocks had forged modest gains through midday. From there, trading was rangebound and without much conviction. Bonds are getting some attention (or should be), as the bloodletting in Treasurys continues and the yield on the ten-year is back near 2.4 percent – up from 1.94 percent less than two weeks ago. Crude oil is up 96 cents to $108.54 per barrel and gold gained $8.6 to $1664.4 an ounce. Meanwhile, the Dow Jones Industrial Average has traded in a narrow 60-point range and is up 16 points. The tech-heavy NASDAQ gained 28. With 50 minutes left to trade, CBOE Volatility Index (.VIX) edged up .37 to 14.84 amid high volume in the options pits. 9.3 million calls and 6.8 million puts traded across the exchanges so far.

Bullish Flow

Las Vegas Sands set a new 52wk share price high today, and a 52wk implied volatility low and call buyers seem to like the odds of continued strength in the name because the short-dated 60 strike calls that expire this Friday are the most active contract, with 8000 on the tape and ISE data confirming that customer buyers have been paying 45cents to open new positions. Shares are the best performing gamins name today, followed by BYD and MPEL, both up about 3%.

BofA (NYSE:BAC) has added 18 cents to $9.98 in the early minutes of Monday’s session and is approaching $10 for the first time since July of last year. The stock is on a five-day 24.9 percent winning streak and it looks like some investors expect additional gains in the days ahead. Weekly (3/23) $10 calls are the most actively traded equity options early-Monday. Volume is approaching 20,000. April and May 10 calls on the bank are busy as well. Total share volume is a very brisk 71 million. Meanwhile, 156,000 calls and 52,000 puts traded in BofA during the first fifteen minutes of Monday’s session. Typical volume is 28,000 calls and 16,000 puts and levels of implied volatility are moving up 10 percent to 48. The 52-week range is 23 (4/29) and 147 (8/8).

Bearish Flow

iPath Short-term VIX Futures Fund (NYSEARCA:VXX) loses 24 cents to $21.32, even as VIX ticks .47 higher to 14.94 Monday morning. The top options trades in VXX so far is a 20,000-lot of Sep 12 puts for 41 cents per contract on ISE. Data is reporting an opening purchase for a customer account. Shares of the fund recorded a 52-week low of $19.98 intraday on 7/7, before rallying to $59.18 in early-October. Bloomberg notes today that the ETF, which is now the largest security tied to volatility, had 100 million shares outstanding as of Mar 16, up 51 percent since Mar 9 and a fourfold increase year-to-date. Strong interest in the product comes despite its poor performance, however. VXX is probing multi-month lows today after a 60 percent plunge since September. (Note that VXX has since come under pressure and is now trading for $20.25 per share. The market on the deep out-of-the-money Sep 12 puts is now 50 to 55 cents.)

Implied volatility Mover

Illumina (NASDAQ:ILMN) ticks 31 cents higher to $50.24 in active trading of 1.1 million shares after the company filed a proxy statement and sent a letter urging that stockholders reject Roche’s hostile takeover attempt. Options on the biotech are seeing increasing volume as well. 18,000 calls and 8,530 puts so far. April 50 calls, which are now 24 cents in-the-money, are the most actives. 6,550 traded. April 55 and 57.5s are the next most actives and levels of implied volatility in ILMN surged 71 percent to 40, perhaps on hopes of a higher offer for the company. However, there have been no indications that Roche stands ready to raise its bid. Shareholders have until Mar 23 to tender their stock at $44.50.