Wednesday Options Recap

 |  Includes: FB, GME, TOL, YHOO
by: Frederic Ruffy


Mini-contagion swept through global equity markets Wednesday. Hong Kong's Hang Seng fell almost 2 percent overnight and market averages traded lower across the Eurozone as well. A spike in Spanish bond yields and concerns that pro-bailout parties are losing support in Greece are keeping anxiety levels elevated on the other side of the Atlantic. The domestic economic news is light and included a disappointing reading on April pending home sales (-5.5% vs. .6% consensus). Meanwhile, Treasurys are seeing some flight-to-safety flow and the yield on the ten-year is falling to new record lows. Crude oil fell to less than $88 per barrel. The Dow Jones Industrial Average opened lower and has failed to stage any meaningful rally attempts. In fact, the Dow is now down 175 points and probing session lows. With 45 minutes left to trade, the NASDAQ is down 39. CBOE Volatility Index (.VIX) gained 2.64 to 23.67 on a day of light volume in the options market. 5.1 million calls and 6.4 million puts traded across the exchanges thus far.

Bullish Flow

Gamestop (NYSE:GME) sees relative strength today and high volume after Sony threw cold water on the idea of an online-only next-generation video gaming system. There had been some concern that a move towards online gaming systems would hurt sales of physical games for retailers like Gamestop. The stock is up 43 cents to $20.14 in brisk trading of 4.4 million shares. 14,000 calls and 2,510 puts traded on GME so far. Jun 20, Jun 21, Jun 26, Jul 21 and Jul 26 calls are among the most actives and 30-day ATM vols are moving up 22 percent to 51.5.

(NASDAQ:YHOO) is off 22 cents to $15.25 and a Jun 13 - 15 bearish risk-reversal is sold on the Internet giant at 50 cents, 7500X. It's tied to 750K shares at $15.25 and part of a "collar" on the stock. Possibly a closing trade. If opening, this is a hedged trade with a breakeven at $14.75 and a potential profit of .25 (~1.7 percent) if shares hold above $15 and the calls are assigned at the expiration, which is in 16 days.

Bearish Flow

The Facebook (NASDAQ:FB) frenzy continues. The stock has seesawed back and forth, but was recently down 63 cents to $28.21 and briefly tested the $28 level (falling to a new low of $28.03) in active trading of 44.7 million shares. 201,000 options traded on the stock. While the projected volume is 250K and well off yesterday's 365K, FB has quickly become one of the most actively traded listed equity contracts. The order flow seems to reflect mixed sentiment. While some investors are showing interest in upside Jun 30 calls, where 20,600 changed hands and 60 percent traded at the offer, a bearish three-way recently printed on the ISE. The investor sold 1,500 Dec 35 calls on Facebook at $2.21 to by 1,500 Dec 23 - 28 put spreads for $2.56. The three-way, for a 35-cent net debit, is an opening position for a customer account, according to ISEE.

Implied volatility Mover

Toll Brothers (NYSE:TOL) is a big implied volatility mover. Shares of the home builder are coming off yesterday's 52-week highs after a report showed Pending Home Sales falling 5.5 percent in April. A .6 percent increase was expected. The news is taking a toll on a number of names in the space and TOL is down $1.63 to $27.06 in active trading of 6 million shares. Roughly 3,500 calls and 8,000 puts traded on the builder so far and 30-day ATM implied volatility in the options is up 20 percent to 43.5.