Monday Options Recap

by: Frederic Ruffy


The major averages traded in a narrow range and are modestly lower late Monday. With no economic data scheduled for Monday and a light earnings calendar, investors didn't find much new information to guide the action early in the day. Commodity-related names are mostly lower after crude oil fell 23 cents to $70.70 a barrel and gold gave up $13 to $946.50 an ounce.

Meanwhile, trading is cautious ahead of event risk later in the week. The Federal Reserve meets to discuss rates beginning Tuesday and issues its post-meeting statement Wednesday afternoon. Retail sales data could move the market Thursday. A handful of retailers, including Walmart (NYSE:WMT), are due to report earnings later this week as well.

On Monday, however, trading is slow. The Dow Jones Industrial Average has traded in a narrow 81 point range and is down 50 points heading into the final forty-five minutes. Approximately 3.25 million puts and 4 million calls traded by midday, a ratio of .81 (compared to a 22-day average of .81). The CBOE Volatility Index (.VIX) is up .66 to 25.42.

Bullish Flow

Tibco Software (NASDAQ:TIBX) is up $1.02 to $9.49, a new 52-week high, and options volume is running 4X the usual. Buyers of Sep 10 calls are leading the flow after DJ reports SAP considering a software maker acquisition. TIBX and Terandata mentioned.

Excel Maritime (NYSE:EXM) is up 21 cents to $7.69 and 6,200 Aug 8 calls traded, compared to open interest of 3,208. Top trade is 1527 contracts for 35 cents on ISE, which is an opening customer buyer, according to sentiment data. 72 percent of the trades hit ask-side, also suggesting buyers are driving the flow in the contract. Shares fell 16 percent last week after the Baltic Dry Index sank 17.3 percent.

Bearish Flow

Sentiment might be shifting in CBS (NYSE:CBS). Call buyers have been active in the stock in recent weeks and, after rallying 26.6 percent on earnings Friday, shares are up another 25 cents to $11.06. One player appears to be taking a contrary view of the situation and bought 12K Dec 7.5 puts for 50 cents on the PHLX. With existing open interest of only 1,326, it looks like an opening trade. 18.3K contracts now traded.

Implied Volatility Movers

Freddie Mac (FRE) implied vols are rallying along with the share price. FRE is up 81 percent to $1.34 after reporting a second quarter profit and saying it had enough capital last quarter. Freddie didn't need to borrow money from the Feds. Shares are up and implied volatility in the options jumped to 210, from about 160 late Friday.

Implied volatility is also higher in Fannie Mae (FNM), Excel Maritime (EXM), and CBS. Meanwhile, implied volatility is lower in McDonald's (NYSE:MCD), Dynegy (NYSE:DYN), and Dish Network (NASDAQ:DISH).