Thursday Options Recap: Earnings On Tap

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 |  Includes: AA, CHKP, FCX, FXI, GOOG, HK, MIPS, SPY, TWI, XLF
by: Frederic Ruffy

Stock market averages are posting solid gains on optimism for the global economy. But the domestic economic news was mixed. Before the opening bell, the Labor Department reported that the Producer Price Index for March was flat. Economists were expecting an increase of .3 percent. Meanwhile, Jobless Claims increased by 13,000 to 380,000 last week. Expectations were for a decline to 355,000. Yet, investors seemed to shrug off the poor claims numbers and perhaps found some solace from news that yields in Spain and Italy eased after a successful auction of Italian debt. There’s also unsubstantiated talk making the rounds that China’s GDP data released Friday (Thursday evening in the US) will top expectations. Some of the commodity-related names (like AEM, FCX, ACI), which have been lagging in 2012 due partly to concerns about China, are seeing relative strength. Meanwhile, crude oil is up 94 cents to $103.64 per barrel and gold gained $18.70 to $1679 an ounce. On Wall Street, the Dow Jones Industrial Average is up 175 points and 5 points from session highs. The tech-heavy Nasdaq gained 40. CBOE Volatility Index (.VIX), which snapped an 8-day winning streak yesterday, is off another 1.84 to 18.18. Options volumes are running about the typical levels, with 7.3 million calls and 5.7 million puts traded so far.

Bullish Flow

Alcoa (NYSE:AA), which reported earnings Tuesday afternoon and led the Dow higher Wednesday, is seeing active trading again Thursday. AA is up 34 cents to $10.24 on volume of 17 million shares. 104,000 calls and 8,300 puts traded on the aluminum-maker. The flow includes a 10,000-lot of May 10 calls for 61 cents when the market was 60 to 61 cents. It was apparently tied to 600K shares for $10.18 and marked buy-write. 35,300 now traded. The second largest trade in AA today is 8120 May 12 calls for a nickel on ISE and the exchange is reporting an opening firm buyer. 13,388 traded. Apr 10 calls are seeing high volume of 31,935 contracts and the overall options flow in the stock seems to reflect the bullish sentiment that has sent Alcoa shares up 9.4 percent since Tuesday.

The top options trade in early morning trading Thursday in the SPDR Financial Fund (NYSEARCA:XLF) after 21280 May 16 calls traded on the ETF for 18 cents on ISE. Data from the exchange is reporting an opening buyer. More than 36,000 have been bought-to-open this morning on ISE and total volume is 46,663, which is today’s most active options contract in the first hour. Shares are up a dime to $15.31 and May 16 calls on the ETF are 4.5 percent OTM with a .28 delta and expiring in 36 days. The contract already has more than 190,000 in open interest. Today’s call buyers are possibly anticipating additional short-term strength in the financials heading into earnings reports from JP Morgan (NYSE:JPM) and Wells Fargo (NYSE:WFC) tomorrow morning. Citi (NYSE:C) reports on Monday and Goldman (NYSE:GS) Tuesday. Then the floodgate for first quarter earnings opens wide beginning on Wednesday.

Bearish Flow

Big Print in the SPYders (NYSEARCA:SPY) might reflect skepticism that the two-day rally will hold, as a May 123 - 128 - 133 put butterfly spread trades on the ETF for 33 cents, 27000X on AMEX. If bought-to-open, the fly would offer its best payoff if SPY falls to $128 through the May expiration, which represents a 7.8 percent market decline during the next five weeks. Shares touched multi-year highs on Apr 2 before suffering a five-day 4.2 percent losing skid. SPY has since snapped back 2 percent in the past two days and retraced 47.1 percent of the five-day slide. Spiders are up 10.5 percent year-to-date.

Implied Volatility Mover

MIPS Technologies (NASDAQ:MIPS) sees a spike to $6.35 and is up 93 cents to $6.14 on heavy volume of 3.3 million shares on reports the Sunnyvale, Calif. memory chip-maker has hired Goldman to find a buyer. Options action is heating up as well. 3,885 calls and 715 puts so far. Apr 6 calls, which are now in-the-money, are the most actives. 2,400 traded. Apr 7, May 6, and Jul 6 calls are also seeing interest and levels of implied volatility in MIPS options surged 41 percent to 84.

Unusual Volume Movers

Bearish activity detected in Check Point Software Technologies (NASDAQ:CHKP), with 4734 puts trading, or 6x the recent avg daily put volume in the name.

Bullish flow detected in Titan International (NYSE:TWI), with 2411 calls trading, or 10x the recent avg daily call volume in the name.

Bullish flow detected in Halcon Resources (NYSE:HK), with 5054 calls trading, or 11x the recent avg daily call volume in the name.

Unusually high options volume is being seen in Google (NASDAQ:GOOG), Freeport McMoRan (NYSE:FCX), and iShares China Fund (NYSEARCA:FXI).