Monday Options Recap

Includes: MS, P, RAX
by: Frederic Ruffy


Stock market averages opened lower and remain in the red late-Monday. Weakness in the euro and across Eurozone equity market set the table for morning losses on Wall Street. Investors are worried about Greece and the country's inability to form a government in the face of its fiscal crisis. The euro is down .6 percent against the dollar and falling to its worse levels since January. Spain's IBEX lost 2.7 percent and paced the decline across Europe's equity markets. Crude oil slipped $1.65 to $94.48 per barrel and gold lost $24 to $1560 an ounce. Trading on Wall Street is cautious ahead of Retail Sales, CPI, and manufacturing data tomorrow morning. The Dow Jones Industrial Average is down 110 points and 50-points from session lows. The NASDAQ gave up 26. CBOE Volatility Index (.VIX) is up 1.77 to 21.66. 7.2 million calls and 7.7 million puts traded across the exchanges.

Bullish Flow

Pandora Media (NYSE:P) has been grinding higher throughout the day on relatively light volume of 1.3 million (avg. daily is 2.1 million) and is now up 44 cents to $9.70. Options volume is running 3X the daily average, with call volume trouncing put volume by a ratio of more than ten-to-one. 9,700 calls and 950 puts traded on the stock so far. Players are tuning in to Pandora's Jun 10 calls. The top trade is a 4,480-lot for 75 cents on ISE and an opening buyer, according to ISEE. 7,750 traded (95 percent Ask) against 2971 in open interest and the market is now 80 to 90 cents. Jun 9 and May 10 calls are the next most actives and 30-day ATM implied vols are up 14 percent to 85.5. No news to explain the relative strength or speculative call buying on the stock today. Earnings are expected on May 23.

Morgan Stanley (NYSE:MS) loses 45 cents to $14.50 and a Jan 13 - 15 put spread is sold on the investment bank at $1.01, 10000X. Looks tied to 250K shares at $14.45 and might close. Separately, a May - Jun 16 put spread is apparently sold on the stock at 27 cents, 20000X, and probably rolls a position of in-the-money puts out one month to avoid assignment heading into the expiration. A similar May - June 110 in-the-money put spread traded in GS today, roughly 20,000 on the day. Goldman shares are testing the $100 level after a 19 percent decline since March. MS is down 26.2 percent during that time. Today's rolling activity might express the view that shares will bounce sometime before the June expiration.

Bearish Flow

9 of the 10 most actives today are May or June puts on the SPDR 500 Trust. The other is .SPX May1300 put. Therefore, the ten most actives are puts on the S&P 500. VIX is up 1.08 to 20.97 and hit a morning high of 21.67, which is not too far from last week's intraday high of 21.59 set Wednesday morning. 3.7 million calls and 4.5 million puts have traded across all the exchanges in the first two hours. The projected volume of 10.3 million puts and 8.3 million calls yields a put-to-call ratio of 1.24, which would easily surpass the 2012 high of 1.15 set Friday.

Implied volatility Mover

Rackspace (NYSE:RAX) loses $1.90 to $50.46 and options volume on the San Antonio, TX web-based IT systems service provider includes 6,670 puts and 765 calls. 5,000 Jun 50 puts traded on the stock for an average of $2.325 per contract on ISE. It's an opening buyer, according to ISEE data. 30-day ATM implied vols are moving up 14.5 percent to 45.5, as some investors might be concerned that the stock will fall below a previous support levels just below $50 per share by mid-June. The stock sank 8.4 percent Tuesday after earnings were reported and are down another 4.1 percent since that time.