Thursday Options Update: GE, NOK, XLF, TSN, TMTA, BBBY

Rebecca Engmann Darst co-authored this article.

General Electric  (GE) – Shares have staged a significant turnaround from an early 1.5% decline and are higher by 3.3% at $25.40 with nearly 167,000 options in play. Broader optimism over a stimulus package hitting dealers' screens seems to have outweighed earlier news from the company that the company is maintaining its 31 cent dividend, but has suspended a share buyback program. It also downgraded its forecast for earnings this year. CEO Immelt noted that the current weakness in the economic climate showed few signs of lifting. Call volume in the front month is rising at the 25 and 26 strikes where investors are banking on a rebound. October puts at the 20, 23 and 25 strikes took up notable volume while the January contract saw similar voting patterns at the 20 and 22.5 strike puts. The January 30 strike calls also saw heavy volume. Implied volatility on these options slipped to 59.3% from yesterday's 65.6% and compares to a historic reading on share price of 78%. December 34 calls are in play at a premium of 9 cents a piece. GE's shares last traded at the price on April 11. 

Nokia Corp ADR (NOK) – Nokia Corp ADR-  Looks like a chunky 20,000 call spread in the October contract between the 21 and 23 strikes is bolstering today's volume. Shares are higher by 3.1% at $20.54 making this options play pretty optimistic. The net 55 cent cost of the trade implies a breakeven at $21.55 and a maximum gain of 1.45 per contract at and above the higher strike. Bulls have also rampaged into the November series with fresh buying at the 20, 21 and 22 strikes.

Financial Select Sector SPDR (XLF) -  Financial Select Sector SPDR– Shares haven't built on the early gain and have actually given up ground from an initial 2.7% rise. Trading at $20.63 XLF options volume totaled 200,000 contracts by noon. Heavy call buying appears to be the order of the day. More than 16,000 lots trading have traded at the October 23 strike calls, while 24,000 lots at the 24 strike and 33,000 lots at the 26 strike are in play. There is clear presumption of further upside potential evident in today's market. 

Tyson Foods Inc (TSN)  – Tyson Foods Inc– Above average options volume is found in this poultry producer where a near 6% share price gain to $12.85 has elicited what could be a strangle in the November contract at the 15 strike call and 12.5 strike put. This might make sense given the fact that implied options volatility running at 87.55 seems elevated in comparison to its historical stock volatility at 48.2%. The volatility boost has accelerated of late thanks to the fact that shares in the company slumped to a 52-week low at $11.00 today. 

Transmeta Corp, (TMTA) – Transmeta Corp, a former competitor to Intel has put itself up for sale according to regulatory filings today stating that the decision was in the best interests of shareholders. The company transformed itself from microprocessor manufacturer to designer once it recognized that competing was fruitless. Shares broke out of their last 10-months' trading range of between $11.26-$15.69 with a 205 leap to $16.20. We're currently showing volume of 5,000 calls and puts at the February 15 strike, which would indicate positioning in a straddle. We're still hunting for details on specifics, but this would be an interesting perspective with a buyer expecting either a bidding war or ultimate failure of the company. A volatility seller would be banking on $15.00 being an appropriate price tag with a deal tied up by the early part of 2009. Implied options volatility rose to 50% today. The trade went to mid-market and appears to have been executed at a price of 4.38. 

Bed, Bath & Beyond  (BBBY) – Bed, Bath & Beyond – following a positive revision of revenue and profit projections, the home furnisher rose almost 5% by lunchtime to stand at $32.20. Options activity hit our market scanner given the 28% reduction in the reading of implied volatility today, which declined to 40% and now compares to share price movement of 48.4% over the last year. Given that much of today's option volume is trading to mid-market prices, which makes it less transparent what investors are doing, we did notice the sale of defensive 30 strike put contracts today on 3,000 lots of volume. The drop in volatility combined with the share price gain has hurt the 60 cent premium, which stands 60% lower than the premium cost of yesterday. Some 6,700 puts at the lesser 27.5 strike price in the same October contract were traded at one quarter of yesterday's premium indicating perhaps that sellers are behind the drop in implied volatility.