Monday Options Recap

by: Frederic Ruffy


Stock market averages are rebounding from the worst weekly loss so far in 2012 and are holding solid gains late-Monday. With no domestic economic news to guide the action, steady trading overseas helped set the table for a modest advance at the open. Germany’s DAX added 1% and led eurozone equity markets after G-8 leaders over the weekend urged Greece to remain part of the EU. The euro is up .1% and making a stab at 1.28 against the buck. Crude oil added $1.08 to $92.88, but gold lost some of last week’s flight-to-safety bid and is off $2 to $1590 an ounce. Stocks are broadly higher on Wall Street and heading to session highs. With an hour left to trade, the Dow Jones Industrial Average is up 114 points and the Nasdaq has rallied 61. CBOE Volatility Index (.VIX) is down 2.93 to 22.17, amid much less defensive action in the options market. After recording four consecutive readings of more than 1.0 Tuesday through Friday, the total put-to-call ratio is .86 today. 6.1 million puts and 7.05 million calls traded so far.

Bullish Flow

Citigroup (NYSE:C) is up 16 cents to $26.17 and one player in the options market seems to think the stock can recapture some of the 31.3% plunge suffered over the past two months. 3,800 Sep 22 – 24 put spreads were sold on the back at 51 cents to buy 19,000 Sep 35 calls for 36 cents. Separately, another investor sold 10,400 Jan14 $20 puts on Citi at $3.15 and is possibly liquidating a position.

Groupon (NASDAQ:GRPN) adds 16 cents to $11.74 Monday and, despite an 11.3% slide Thursday and Friday, is up 22.5% from the all-time low of $9.63 set on May 11. One investor seems to be anticipating additional gains over the next few weeks, as a Jul 12 – 16 call spread is apparently bought on the stock for 65 cents, 4,578X. Open interest in the July 16s is 7,364 contracts and so the spread might be a roll down in strikes. The bullish play comes a week after the company reported earnings. The stock rose 3.7% on the news Tuesday, but has since given up the gains.

Bearish Flow

Dell (NASDAQ:DELL) is up 18 cents to $14.92 and options volume is running 3.5X the daily average ahead of this afternoon’s earnings report. 21,000 calls and 30,000 puts traded on the computer-maker. The top trade is a Jan $13 – 15 put spread, apparently bought for 50 cents, 3,000X, and is possibly a defensive position ahead of the news. Not only have Dell shares traded lower on the heels of its previous three earnings releases, for an average daily post-earnings loss of 6.3%, the stock is down an additional 13% since falling 5.8% on 2/22 when profits were last reported. The reaction in DELL this afternoon could have implications for H-P, which reports Wednesday and has seen a similar price decline since falling 6.5% on 2/23 after the company’s last earnings release.

Implied Volatility Mover

Implied volatility in the options on CVR Energy (NYSE:CVI) surged today, as shares climb $1.11 to $31.58 and new 52-week highs on light volume of 855K shares (expected is 2.8 million). Options volume is running 2.5X the daily average. 3,450 calls and 5,580 puts so far. The flow has been in smaller lots. The largest is 250 Jun 32.5 straddles for $3.12 on ISE. A firm bought both Jun 32.5 puts and calls, to open, according to ISEE. June 27.5 and 30 puts are also among the most actives in CVI today. Meanwhile, 30-day ATM implied volatility in the options on the Sugarland, TX, oil refiner surged 96% to 33.5 on reports Carl Icahn increased his stake to 80% and essentially took control of the company's board.

Unusual Volume Movers

Bearish activity detected in AutoZone (NYSE:AZO), with 3,445 puts trading, or 2x the recent average daily put volume in the name.

Bearish activity detected in BlackRock (NYSE:BLK), with 2,384 puts trading, or 4x the recent average daily put volume in the name.

Bearish activity detected in Suntech Power (NYSE:STP), with 11,222 puts trading, or 4x the recent average daily put volume in the name.

High options volume is being seen in DELL, JPMorgan (NYSE:JPM) and NetApp (NASDAQ:NTAP).