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Sentiment

The underlying tone of trading was cautious early amid ongoing uncertainty over Europe and market action is now mixed late-Monday. While French elections have been decided, uncertainty remains about Greece and the risk that a shift in leadership could potentially derail bailout efforts - which might roil the European banks and trigger another wave of volatility across global financial markets. Yet, those concerns might have already been discounted after the steep losses seen in European markets in recent weeks. Today, Spain's IBEX has rebounded for a 2.7 percent gain and Italy's MIB Index rose 2.6 percent. The euro, which sank to 1.2954 overnight, is now at 1.305 against the buck. Crude oil is off 56 cents to $97.93, gold slipped $8 to $1647 an ounce and the Dow Jones Industrial Average is off 13 points. However, the tech-heavy NASDAQ has erased early losses and is up 7 points. CBOE Volatility Index (.VIX) hit a morning high of 19.87 and is now down .46 to 18.70. No sign of panic in the options market. 5.5 million calls and 5.5 million puts traded across the exchanges so far.

Bullish Flow

Cisco (CSCO) adds 4 cents to $19.16 and a May 19 - 20 (1X2) call ratio spread trades on the stock for 24 cents, 6250X. The spread is being initiated two days before the networking giant reports earnings and offers a max payout if shares settle at $20 at the expiration, or a 4.4 percent advance in the next 11 days. CSCO May 20 calls are today's most actively traded equity options contract so far. 26,600 have changed hands.

Bearish Flow

Patriot Coal (PCX) loses ten cents to $5.23 and a May 6 - Jun 5 put spread trades on the stock at 40 cents, 12000X on PHLX. Looks like the June 5 puts, which have traded more than 20,000 contracts on the day, are being bought to open and the spread is possibly a roll. We noticed May 6 put buyers in late-March for 69 cents per contract. The contract is trading at 89 cents today. PCX is moving to 52-week lows after a plunge of almost 80 percent from a year ago. The interest in Jun 5 puts comes ahead of the company's earnings report, due tomorrow morning.

14 of the 16 most active options early Monday are puts on the SPDR 500 Trust (SPY). Despite indications for a steep market drop reflected in the futures market overnight, trading quickly turned mixed Monday morning and the Spiders are now up 7 cents to $137.07 on volume of 55 million shares, which is in-line with the recent average daily turnover for SPY. Meanwhile, 693,000 puts and 241,000 calls traded on the ETF. Downside May 137, 135, and 133 puts are the most actives contracts today. Weekly 133, June 136, May 136, Weekly 136, June 130, and June 134 puts are also actively traded today. 30-day ATM implied vols are up another 1 percent to 17 and have risen more than 23 percent since April 27. The IV of the 25 delta June put is now 20.5, compared to 14.5 for the June 25 delta call. The skew is a bit less than Friday, but still reflects the fact the vols in S&P downside puts remain bid amid ongoing concerns about the macroeconomic backdrop.

Implied volatility Mover

Alere (ALR) sees a second day of bullish order flow. Jan 22 calls on the stock were busy Friday. Shares are up 36 cents to $22.23 and Jun 25 calls on the Waltham, MA medical labs company are the most actives today. 5,240 traded, including 3,170 contracts for an average of 42.5 cents on NYSE-ARCA when the market was 30 to 45 cents. Looks like opening call buying and 30-day ATM implied vols are up more than 30 percent to 48. Bullish trading might be related to news late Friday that preliminary results from a trial of warfarin showed higher safety than existing therapies. 7,000 calls and 1,040 puts traded on the stock today, which is 16X the daily average, but share volume is relatively light at 880K.

Source: Monday Options Recap