Tuesday Options Update: UNG, WYE, XLF, GE, AAPL, MRVL, FNM, MCRS, CLNE, CAKE,

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 |  Includes: AAPL, CAKE, CLNE, FNMA, GE, MCRS, MRVL, UNG, WYE, XLF
by: Interactive Brokers

Rebecca Engmann Darst contributed to this report.

US Natural Gas Fund (NYSEARCA:UNG) – Here’s a trade that stuck out like a sore thumb to us today. We saw 16,000 call options in the April series trade at the 70 strike for a premium of 0.90. The volume represents 5% of current open interest in this fund that tracks the price of natural gas. While the size of the trade stands out (it comprises 39% of today’s option volume), it’s the strike price that’s unusual. The UNG is currently trading at a share price of $38.38 (+4% on the day) and so would require an 82% price surge for a call option buyer to breakeven. Delta implies a 10% probability of this happening. What strikes us further is that when we look at the price of natural gas, two things jump out at us. First is that when the energy contract peaked in early July at $8.26 the UNG fund reached an all-time peak at $63.89 and so still well below the April strike in play today. Second is that yesterday the natural gas contract reached an eight-month low at $7.62. For that you can blame both dollar strength and further weakness in the price of crude oil as the global economy slows. Since the option trade was made at the middle of the market we can’t discern whether it was initiated by a buyer or seller. It is possible that this may have been either an investor trying to take in premium against a low-probability outcome or it could be a covered call.

Wyeth (WYE) – Pharmaceutical-maker Wyeth has seen its front-month implied volatility level pretty steady at around 30% ever-since its shares plunged in a single day from $45 to $38.33 in July. With shares higher today and in recovery mode an investor is punishing October at-the-money volatility in the form of a short straddle at the 42.50 strike for a combined trade credit of 4.17. Interestingly enough the lower break even in this case is at the exact $38.33 low point reached one month ago and which provides clear chart support in January and March also. The trade involved 19,000 lots and the investor is looking for both erosion of time value and steadiness in Wyeth shares going forward.

Financial Select Sector SPDR (NYSEARCA:XLF) – The stock market took slight comfort in the fact that existing home sale data was less dour than could have been the case and that helped set a better tone in the financial sector. Options on the financial ETF was robust once again at 50,000 with close to two calls trading for each put in play in the first hour of trading. September calls at the 20 and 21 strikes were popular, while in the October series the most active contract was at the 21 strike where 11,000 calls changed hands at a price implying a breakeven by expiration at $22.00.

General Electric (NYSE:GE) – we notedin Monday’s report how investors appeared to be taking in premium through selling longer-dated put options in GE, giving the sense that shares won’t keep on falling forever. The major tone in the options series today is similar. The March 25 strike puts, where currently less than 1,000 contracts of open interest exist, was largely sold within overall series volume of 17,773 lots at a premium of around 1.3. Shares in the company would need to settle lower than $23.70 at expiration to this view. The delta on this series at 31% implies around a one-in-three possibility of the share price landing at or below there in severn months from now.

 Apple Inc. (NASDAQ:AAPL) – Options statistics on iPhone-maker Apple Inc were bullish as shares added 1.25% to stand at $74.70. Puts at the 160, 145 and 140 strike appear to have largely been sold, while calls at the 175 and 180 strikes look to have been bought at the expense of 190 and 195 strikes indicating possible bullish call spread activity.

Marvell Technologies (NASDAQ:MRVL) – Investors seem to be taking the opposite tack to the views of analysts at Jefferies & Co. and Lehman Brothers who both lowered their opinions about the company today. While the underlying share price declined by 6.75% to $14.62, options traders took the opportunity to sell puts (a bullish play on the shares) at the 15 strikes in both September and October indicating a degree of skepticism over today’s decline. Given that Marvell makes chips for Blackberry and iPhone it does seem odd that with Apple shares higher and investor optimism advancing, that Marvell should suffer.

Fannie Mae (FNM) – It appears to be one-way traffic for options plays on mortgage victim Fannie Mae in early trading and it could be the case that the worst of the pain maybe over for the GSE’s for now at least as evidenced by creeping optimism in today’s option market activity. Shares are 18.5% higher at $6.11 while September puts at the 2.5, 4.0 and 5.0 strikes appear to have been initiated by sellers so far. On the long side there was heavy action at the 6.0, 7.0 and 7.5 strikes with upside apparently capped by sales of 8.0 and 9.0 strike calls.

Micros Systems Inc (NASDAQ:MCRS) –  This stock has tiny existing open interest of just 9,409 contracts and today’s early volume of almost 30% of that amount is concentrated in a 2,000 lot put trade at the September at-the-money strike where the premium paid was 1.60. That implies a drop in the stock from current $30.45 to $28.40 by expiration next month. The premium on the puts jumped around 40% overnight based in part on a 2.5% decline in the share price. Today’s volume is about 17-times average daily volume.

Clean Energy Fuels Corp. (NASDAQ:CLNE) – Shares in thisalternative energy provider are 6.26% higher at $15.12 Tuesday and options volume of 3,200 contracts is firmly skewed towards the bullish side of the tape. Once again today’s volume represents some 30% of the current open interest total. It appears to be fresh call buying at the September 17.5 strike call at 0.30 premium where the market currently assigns a 23% chance that shares will reach this price before expiring .

Cheesecake Factory (NASDAQ:CAKE) – Despite a 6.25% slide in its shares at the Cheesecake Factory, it appears that some investors are still prepared to put faith in the company in the form of bullish option plays. Today’s volume stacks up at in the October 15 calls at the sharply lower premium cost of 1.00 today (down 35% on the session). The company’s shares have fallen from the mid-$20’s in the early summer to a 52-week low at $13.69 at the end of July.