Wednesday Options Recap

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 |  Includes: AGO, BAC, GE, SPY
by: Frederic Ruffy

Sentiment

Trading turned mixed, with no news to drive things one way or the other Wednesday. The only economic stat of the day was Existing Home Sales, which slipped to an annual rate of 4.59 million in February; which was down from 4.63 million in January, but in-line with expectations. Not much news emerged out of Europe, where major averages finished narrowly mixed. The euro is down .2 percent and holding at 1.32 against the buck in rangebound action as well. However, crude oil gained $1.17 to $107.24 per barrel. Gold edged up $5.6 to $1652.60 an ounce. Not much is happening on Wall Street. The Dow Jones Industrial Average has traded in a 77-point range and is down 23 points. The NASDAQ gained 14 points, despite post-earnings weakness in Oracle. CBOE Volatility Index (.VIX) hit a low of 14.19, but was recently down .49 to 15.09. Trading in the options market is busy despite the lack of volatility. 6.9 million calls and 5.9 million puts traded through 14:45 Eastern Time.

Bullish Flow

85,000 calls and 18,000 puts traded in GE today. Shares are up 24 cents to $20.31 and the top trade is a 12,600 lot of May 22 calls for 11 cents on NYSE-ARCA, which was a buyer, according to a source at the exchange. Separately, 12,500 were also bought for 11 cents on AMEX and 10,000 more on ISE. More than 43,000 traded. $21 calls, which saw big buyers last week, are active again today as well. 14,560 Apr 21s traded and more than 10,000 May 21s changed hands. Upside call buying in GE comes as shares have already rallied 13.3 percent year-to-date. Earnings will come into play again on Apr 20.

BofA (NYSE:BAC) made another stab at the $10 "psych" level this morning, but was up a nickel to $9.85 midday. Still, sentiment seems bullish as morning trades on the bank include a buyer of 25000 BAC Aug 12 calls for 42 cents per contract on PHLX. Separately, but at about the same time, 22,380 Aug 10 calls traded on the bank for $1.08 on ISE, where data report an opening customer buyer. Shares volume is a brisk 114 million, while 190K calls and 69K puts already traded in Bank of America. Levels of implied volatility have eased 1.5 percent to 46, but still well (31.4%) above this year's low of 35 set on 3/7

Bearish Flow

April 135 puts on the SPDR S&P 500 Trust (NYSEARCA:SPY) are today’s most actives. Top trade is A 21,670-lot for 77 cents per contract on CBOE when the market was 76 to 78 cents. Beyond that, a lot of the activity has been on the International Securities Exchange. ISEE data from the exchange is reporting that 49,270 SPY April 135 puts have been bought to open on the ISE so far today. 128,000 traded across all the exchanges at a VWAP of 78.4 cents. The Spiders have added 6 cents to $140.50 through midday and are now up 4.3 percent since March 6. SPY has rallied 12.2 percent year-to-date, but has been struggling over the past week to make a move beyond $141. Today’s high volume in April 135 puts, which are 3.9 percent out-of-the-money and expiring in four and a half weeks, seems to reflect concerns about a correction in the weeks ahead. Total SPY volume today is 875K calls and 431K puts.

Implied volatility Mover

Assured Guaranty (NYSE:AGO) lost $3 to $15.82 and implied volatility in the options on the stock is up sharply after Moody's put the bond insurance company's credit rating up for review for possible downgrade. AGO is under fire and options volume is running 5.5X the daily average. 8,150 puts and 5,745 calls traded on the stock so far. May 14 puts, which are now 11.5 percent out-of-the-money, are the most actives. 1,660 traded so far. July 15 puts are the second most actives. 958 traded. The rest of the flow is mostly scattered across Apr and Jul puts and calls with strikes ranging from 14 to 20. Meanwhile, levels of implied volatility which had touched 52-week lows of 30 on 3/16 are up 28 percent to 40.5 on the day.