Friday Options Recap

by: Frederic Ruffy


Global equity markets are rallying around hopes that EU leaders are making necessary steps to stem the debt crisis. Officials announced plans to provide capital to the region’s troubled banks directly rather than through European Central Banks. As was probably intended, the news triggered a sharp decline in Spanish and Italian bond yields. The euro surged 1.7 percent to 1.265 on the buck and equity markets rallied. Italy’s MIB gained 6.5 percent and Spain’s IBEX 5.7 percent. Germany’s DAX and France’s CAC 40 both rallied more than 4 percent. The enthusiasm spilled over onto US shores despite in-line May personal incomes/spending numbers as well as weaker-than-expected Chicago PMI and Uof Michigan Consumer Sentiment. Poor earnings from Nike (NYSE:NKE) and RIMM didn’t have much market impact, either. Instead, the news from Europe overshadowed any other headlines, and the Dow Jones Industrial Average is up 233 points and the NASDAQ added 74 points. Crude oil bubbled $6 higher to $83.69 per barrel and gold gained $54 to $1604.50 an ounce. CBOE Volatility Index (.VIX) is off 1.71 to 18 amid the highest volumes seen this week. 6.6 million calls and 6 million puts so far.

Bullish Flow

Valero (NYSE:VLO) adds 16 cents to $24.09 and is seeing muted reaction to today's surge in crude oil prices, which were recently up 7.6 percent to $83.62 per barrel and session highs. One player seems to be anticipating strength in shares of the oil refiner, however, as a Jan 30 - 35 call spread was bought on VLO for 50 cents, 15000X on ISE. A customer bought the spread to open, according to ISEE. The stock has seen relative strength in recent weeks. Despite volatility in the commodity, VLO is up 14.7 percent month-to-date.

Bearish Flow

JC Penney (NYSE:JCP) is up 52 cents to $22.98 and the Nov 17 - 21 put ratio spread, which saw interest earlier this week and late last week, is seeing interest again today. 15,000 traded for 44 cents, as it appears that the investor bought 1 Nov 21 puts for every 2 Nov 17 sold and probably adding to the positions, which are now the two largest positions in the name.

Implied Volatility Mover

Bank of America (NYSE:BAC) is up 26 cents to $8 and the Weekly 8 calls and puts on the bank are the most actively traded equity options across the market so far today. 41,600 calls and 26,725 of the puts. Open interest is 61,992 and 5,316, respectively. Some pinning possibility, as this weekly at-the-money straddle on BAC is trading 7-9 cents. Meanwhile, overall levels of implied volatility in BAC have eased 10 percent to 40.5 today and are returning to the lower end of the 2012 (35 – 56) range.

Unusual Volume Movers

Bearish activity detected in New Oriental Education & Technology Group (NYSE:EDU), with 3706 puts trading, or 10x the recent average daily put volume in the name.

Bearish activity detected in Genuine Parts (NYSE:GPC), with 2451 puts trading, or 19x the recent average daily put volume in the name.

Bullish flow detected in Walter Energy (NYSE:WLT), with 18051 calls trading, or 2x the recent average daily call volume in the name.

High options volume is being seen in RIMM, Nike (NKE), and Micron Technology (NASDAQ:MU).