Monday Options Recap: Brisk Trade In NFLX

by: Frederic Ruffy

Stock market averages are lower on renewed worries about the European debt mess. The euro is off .6 percent to 1.3143 on the dollar and Germany’s DAX paced a broad decline across Eurozone equity markets with a 3.4 percent loss. Indecisive elections in France cast a spotlight on inept French leadership, while yields continued to tick higher in Spain and Italy. Without any domestic economic data scheduled until Tuesday and only a handful of second tier earnings releases Monday morning, there wasn’t much else to guide trading. The Dow Jones Industrial Average fell at the open and staged a feeble rally attempt through midday. Still, the Dow is down 110 points and the Nasdaq lost 29.5 points. Implied volatility is higher across the options market, where a busy week for earnings continues to drive a lot of the action. We continue to see a flurry of activity in Apple (NASDAQ:AAPL) ahead of its report Tuesday. Netflix (NASDAQ:NFLX), US Steel (NYSE:X), and Texas Instruments (NYSE:TXN) are seeing some pre-earnings action today as well. Meanwhile, CBOE Volatility Index (.VIX) is up 1.62 to 19.06 amid busy trading in the options market. 7.1 million calls and 6.5 million puts so far.

Bullish Flow

Bold pre-earnings options trade in Netflix (NFLX), as a May 115 – 130 call spread is bought on the stock for $2.85. It was a slight ratio, as 7,000 May 115 calls were bought for $3.96 and 6,800 May 130 calls sold at $1.11. It’s possibly a position adjustment, as the stock is down $4.14 to $101.97 and there is sufficient open interest to cover in both contracts. Earlier today, a Weekly (4/27) 85 – 105 put spread was sold on NFLX at $6.80, 7500X, and is possibly closing activity after the stock’s one-month 16.2 percent slide. Overall, trading in NFLX is brisk Monday. 4.6 million shares so far. 73,000 calls and 89,000 puts traded no the stock. With less than an hour left to trade, 30-day ATM implied volatility is up 11 percent to 83 today ahead of earnings, due out after the closing bell.

Big Put Write ahead of Investor Day/Earnings: Newmont Mining (NYSE:NEM) is off $1.54 to $45.71 after gold lost $11.5 to $1631.5 and ahead of the company’s Investor Day today. One investor seems to view today’s weakness as an opportunity to sell 10,000 May 50 puts on the stock at $4.75 per contract. The put write, which is tied to 800K shares at $45.69, might be a liquidating trade, as the contract is now 9.4 percent ITM and has 27,885 in open interest — which is the biggest OI position in the name. NEM is falling to new 52-week lows today ahead of an Apr 27 earnings report.

Bearish Flow

Put spread buyer banks a big win in Conoco Phillips (NYSE:COP). Shares are down 26 cents to $72.62 and an Aug 60 – 70 put spread trades on the oil company at $2.30, 9400X on AMEX, and $2.25, 5000X on PHLX. The activity likely closes some of the positions opened in mid-March and highlighted in WhatsTrading Premium on March 15 when the same spread was bought for $1.50, 20500X to open. Shares are down on earnings news today and have lost 5.2 percent since that time. Today’s spread trader is taking money off the table now that the earnings event risk has passed. 30-day ATM implied vols have eased 2 percent to 18.5.

Implied Volatility Mover

Arm Holdings (NASDAQ:ARMH) loses 43 cents to $27.43 and options volume on the chipmaker is running 13X the daily average, being driven by a bearish three-way spread. An investor sold 8245 Jun 31 calls on the stock at 25 cents to buy 8245 Jun 24 – 27 put spreads for $1. The spread, for a 75-cent net debit, traded on NYSE-ARCA and looks opening. It also traded 1100X on ISE. Bearish action in ARMH might to hedge a position in stock after a three-day 5.4 percent losing skid and ahead of earnings, tomorrow morning. 30-day ATM vols are up 6 percent to 38 ahead of the report.

Unusual Volume Movers

Bullish flow detected in Citrix Systems (NASDAQ:CTXS), with 2629 calls trading, or 2x the recent average daily call volume in the name.

Bearish activity detected in Host Hotels and Resorts (NYSE:HST), with 6196 puts trading, or 48x the recent average daily put volume in the name.

Bullish flow detected in US Airways (LCC), with 10916 calls trading, or 3x the recent average daily call volume in the name.

Unusually high options volume is being seen in Walmart (NYSE:WMT), US Natural Gas Fund (NYSEARCA:UNG), and Visa (NYSE:V).