Wednesday Options Recap: RadioShack, Kohl's See Action

by: Frederic Ruffy

Stocks are battling off the day’s lows heading into the final hour of trading, but stock market averages remain deep in the red late Wednesday. The table was set for a volatile session by sharp losses across Eurozone equity markets following a disappointing auction of Spanish bonds. Germany’s DAX helped pace the decline with a 2.8 percent skid. The volatility spilled over onto US shores and seemed to overshadow the day’s other news. Before the opening bell, ADP reported that the US economy added 209K private sector jobs last month; which is a bit less than expected, but seems to suggest Friday’s jobs report will also show an increase of more than 200,000 payrolls. Nevertheless, the dollar is higher and big losses are being seen in some of the commodities markets. Gold is off $50 to $1622 and crude slipped $2.25 to $101.75 per barrel. The Dow Jones Industrial Average is off 117 points, but 62 points off session lows. The Nasdaq gave up 49. CBOE Volatility Index (.VIX) seized 1 point to 16.66 amid decisively more cautious trading in the options market. 6.8 million calls and 7 million puts traded across the exchanges so far (excluding ex-dividend activity).

Bullish Flow

RadioShack (NYSE:RSH) adds a dime to $6.25 and options volume on the electronics retailer is double the average daily, with 7,550 calls and 1,050 puts traded on the stock so far. The action is heavily concentrated in Apr 7 calls, where 6180 contracts have changed hands. While the top trade is a 500-lot on the 11-cent bid, 72 percent of the total volume has traded at the offer and the action includes a multi-exchange sweep of 732 contracts this morning for 7 cents when the market was 5 to 7 cents. The stock is up 10 cents since then and implied vols (in Apr 7 calls) lifted from 60 to 72. Relative strength in the stock and bullish order flow is possibly bottom-fishing after the 38.9 percent plunge seen since January. RSH was setting new 52-week lows of $6.04 earlier today.

Kohl's (NYSE:KSS) loses a dime to $51.71 in active trading of 2.7 million shares and options volume is running 3X the daily average, with 18,000 calls and 3,000 puts traded on the retailer so far. The activity includes a multi-exchange sweep of 4,264 Apr 55 calls for 20 cents and another 2,991 for 15 cents. ISEE is reporting opening buyers (firm and customer). 7,965 now traded. May 52.5 calls are the second most actives. 7,045 changed hands. Levels of implied volatility in KSS moved up 13 percent to 27, as some players are possibly taking positions in upside calls in anticipation of tomorrow's same store sales numbers. Shares slipped 1.6 percent on 3/1 after the company reported a .8 percent decline in Feb sales. JP Morgan upgraded the stock two days ago to Neutral from Underweight.

Bearish Flow

Options volume on CBS (NYSE:CBS) is running 2X the daily average, being driven by a May 30 – 33 put spread, which traded for 80 cents, 1600X on CBOE. A source on the floor confirms the spread was bought and this appears to be a new position. 5,540 puts and 1,175 calls now traded on the stock. CBS is down 98 cents to $32.90 in active trading of 4.2 million shares. Today’s spread trader seems concerned about a move to $30 (~8.8%) or below through the May expiration (44 days). Shares notched new 52-week highs of $34.17 yesterday and are up 21.2 percent year-to-date. Earnings were last reported on 2/15.

Implied Volatility Mover

SanDisk (SNDK) was under fire Wednesday morning after lowering its revenue guidance due to weaker pricing and slower demand. Shares are down $4.45 to $45.60 on heavy volume of 13 million shares and trading in the options market is busy as well. 56,000 calls and 24,000 puts traded on the chipmaker so far. The top trade is 9885 May 55 calls at 20 cents on the ISE. Data from the exchange is reporting an opening seller for a customer account. 10,966 contracts now traded. The next largest trade is an 8266-lot of Jan 50 calls for $4.60 on BOX when the market was $4.45 to $4.60. Volume in the Jan 50 calls is now 10,130 contracts. Apr 46 and 50 calls are the next most actives and levels of implied volatility in SNDK options moved up 4.5 percent to 46.5.

Unusual Volume Movers

Bearish activity detected in Synovus Financial (NYSE:SNV), with 12812 puts trading, or 9x the recent avg daily put volume in the name.

Bearish activity detected in Fushi Copperweld (NASDAQ:FSIN), with 6430 puts trading, or 3x the recent avg daily put volume in the name.

Bullish flow detected in Shaw Group (NYSE:SHAW), with 7630 calls trading, or 4x the recent avg daily call volume in the name.

Unusually high options volume is being seen in Micron (NASDAQ:MU), AIG (NYSE:AIG), and Qualcomm (NASDAQ:QCOM).