Seeking Alpha
Profile| Send Message| ()  

It’s options-expiration Friday! A relatively quiet trading so far, with earnings news driving a lot of the action. Microsoft (MSFT) is up 5.5 percent and helping both the Dow and Nasdaq after results topped Street views. GE (GE), McDonald’s (MCD), and Deutsche Bank (DB) are also seeing post-earnings gains. Sandisk (SNDK), Riverbed (RVBD) and Tempur Pedic (TPX) are suffering losses on “the dog ate my first quarter earnings” type action.

On the economic front, the calendar is empty until Tuesday’s reports on housing prices and consumer confidence. Trading was orderly across the eurozone after Spain’s IBEX bounced back from 3-year lows and gained 1.2 percent. Crude oil gained $1.15 to $103.87 and gold is seeing a second day of eerily quiet trading. The yellow metal ticked up $1.7 to $1643.1. On Wall Street, the Dow Jones Industrial Average was sporting a triple digit gain through the morning session, but is now up 83 points. The Nasdaq has pared its gain to only 1.6 points and is being weighed down by Apple (AAPL) for a second day. CBOE Volatility Index (.VIX) is down .88 to 17.48, but likely to tick higher early next week ahead of Wednesday’s FOMC post-meeting announcement. Trading in the options market is active due to the expiration. 8.4 million calls and 6.8 million puts traded across the exchanges so far.

Bullish Flow

Sequenom (SQNM) adds 35 cents to $5.03 on heavy volume of 4 million shares and options order flow on the biotech is bullish Friday, with 4,300 calls and 400 puts traded so far — a ratio of more than ten-to-one. Options traders are showing the most interest in Jun 6 calls, which are 19.3 percent OTM and expiring in two months. Apr 5, May 6, and Jan 7.5 calls are seeing interest as well and 30-day at-the-money implied volatility is up 2.5 percent to 76.5. No news on the stock today. Shares hit an intraday 52-week low of $3.52 two weeks ago and have skyrocketed nearly 43 percent since that time. The stock saw a lift on March 8 after earnings were reported and again on Apr 17 when it announced an amendment to a multi-year supply agreement with Illumina (ILMN). Today’s options order flow seems to express confidence that the stock will continue its rally in the weeks ahead.

Harley Davidson (HOG) sees an afternoon spike to $51.96 and is up $1.92 to $51.48 on increasing volume of 2.7 million shares. Options action is heating up as well. 9,470 calls and 2,955 puts traded on the motorcycle-maker so far. May 55 calls, which are 7.2 percent out-of-the-money and expiring in one month, are the most actives. The flow includes a 2000-lot for 37 cents per contract on ISE and is an opening customer buyer, according to ISEE. 5,850 now traded. Aug 55 and May 60 calls are the next most actives and 30-day ATM implied vols are up 4 percent to 34.5. The spike in the stock is being attributed to analyst commentary suggesting that industry data were released early and are better-than-expected. That has not been confirmed, but for whatever reason, players in the options market are going hogwild for upside calls on Harley Davidson Friday afternoon. Earnings are slated for the morning of Apr 25.

Bearish Flow

AT&T (T) ticks up 20 cents to $30.94 and was one of 25 Dow stocks trading higher in the first hour Friday. Recent options trades on the stock include a 17000-lot of May 25 puts bought for 4 cents per contract to open. 18,890 now traded. May 25 puts on the stock are 19.2 percent OTM with a -.02 delta and expiring in four weeks. AT&T gapped down on Apr 5 and saw a three-day 4.6 percent move lower to $30.13, but has recovered about half that loss since that time. Still, shares are down 3.2 percent from the 52-week high one month ago (up 2.3 percent year-to-date). Today’s put buyers might be anticipating a volatile reaction to the company’s earnings results, which are due out the morning of Apr 24.

Implied Volatility Mover

Cirrus Logic (CRUS) loses 9 cents to $22.87 and puts on the chipmaker are busy for a second day. Open interest in put options on the stock increased by 5,500 contracts (compared to +585 calls), as investors were opening new positions in May 21, 22 and 24 puts Thursday. Today, May 21 puts are the most actives. 1,950 traded (96 percent Ask) and it appears that new positions are again being opened. Total volume so far is 4,340 puts and 1,495 calls. 30-day ATM implied volatility in CRUS, which jumped 17.5 percent to 58 yesterday, is up another 12 percent to 65.5 today. Earnings will be reported the afternoon of Apr 25. Some investors might be buying puts to protect recent gains in the stock ahead of the news. Cirrus is up 43.7 percent year-to-date.

Unusual Volume Movers

Bullish flow detected in Kodiak Oil and Gas (KOG), with 9889 calls trading, or 3x the recent avg daily call volume in the name.

Bullish flow detected in Jones Group (JNY), with 2836 calls trading, or 17x the recent avg daily call volume in the name.

Bullish flow detected in Momenta Pharmaceuticals (MNTA), with 2926 calls trading, or 3x the recent avg daily call volume in the name.

Meanwhile, unusually high options volume is being seen in Sandisk (SNDK), Microsoft (MSFT), and Chesapeake (CHK).

Source: Friday Options Recap: Expiration Day