Thursday's Options Report: Ford, GM, Google, GlobalSantaFe, Wal-Mart, NRG

 |  Includes: F, GM, GOOG, GSF, NRG, WMT
by: Interactive Brokers

F - Ford - Yesterday's 6-hour walkout by Chrysler auto workers under the banner of the UAW was mercifully brief thanks to an accord that will create a union-run medical fund for Chrysler workers, but without the rub of future job guarantees like those wangled from talks front runner GM. The agreement raised prospects that a strikeless settlement can be reached with tertiary target Ford, generally regarded as the weak link of the three auto makers - the one with the shallowest pockets for concessions and with the greatest potential damage effect from a strike. Ford (NYSE:F) shares responded buoyantly to the news, gaining 6.8% to $8.78. Volume appears clustered in the November and December contract, where traders wrote November 9.0 calls in fresh positioning, against the purchase of November 8.0 puts. The strategy was reversed in the December contract, where December 9.0 calls were bought against the sale of puts at the 7.0 strike level.

GM - Meanwhile, shares in Ford peer General Motors bounded to a two-year high today, up 4.8% to stand just below $39.98 after UAW members ratified the terms of its recent collective bargain agreement. Option traders put more than 192,000 contracts in play, appearing to plow into the October 40 calls, which were heavily bought. The same strike in the November contract attracted buyers and sellers, as the price of the November 40 call doubled in price today. While overall open interest shows investors still defensively positioned in GM options, with puts outweighing calls by a factor of 1.8, today's volume is an indication of some traders betting on a return of GM shares to 2004 levels.

WMT - Wal-Mart - This morning's 1.4% rise in September same-store sales and upscaling of Q3 earnings guidance were a welcome surprise to investors weary of sifting through the jumble-sale prospects of leading retailers. Just a couple of months ago the big-box chain was sounding the alarm over the pinched state of the American discount consumer. The news sent shares 3.2% higher to $47.08 this morning, with more than 83,000 option contracts in play. A look at options action shows traders less inclined to jump on the directional bandwagon and likelier to take profits. Three times as many calls are moving as puts today, with heavy selling in the November 47.50 calls, where premiums increased 100% overnight. The urge to close out call positions extended into the December contract at the 50 strike, where premiums are up 62% today.

NRG - A 4% gain for shares in the power plant operator to $45.22 has sent options traders on a quest for bull plays. With options trading at more than 5 and a half times the average volume, call buyers are plying into the 45 and 50 calls in the October, November and December contracts on sharply higher premiums. Implied volatility, at 40% and rising, also shows a keen elevation from the 25% historical reading. NSF reports earnings on October 29.

GSF - Offshire oil driller GlobalSantaFe, which operates a fleet of 61 marine drilling rigs, is trading 1% higher today at $78.33, but the options market is rife with bullish speculation in the company. Options are trading at 28 times the average volume, with the 74,000 active contracts matching nearly a fifth of prior open option positions in Global Santa Fe. Today's volume is split between the October 80 and November 85 calls, which have traded to buyers on sharply higher premiums, as traders wager on a move past the standing 52-week high of $80.34 by mid-November.

GOOG - The enchanted search engine continues to cast its spell over option bulls, as shares gain 2.25% to $639.45 in early trading. Option players activated nearly 90,000 contracts in the first 90 minutes of the market session, with a volume bias to calls. The upward trek was accompanied by implied volatility - which took a 12% leap this morning, 1 week ahead of earnings. Today's activity is a call flurry in the front month contract at strikes of 620 to 650, with builds at the 750 strike seen in October and November after a fresh wave of punditry betting on Google "trigger-numbers" in the $735-750 range.