Monday Options Recap

by: Frederic Ruffy


The major averages have given up early gains and are trading modestly lower on a slow news day Monday. With no earnings of importance and no economic data on the calendar, some of the early focus was on falling commodity prices. Crude oil traded lower early and is down $1.56 to $73.91 late. Gold lost $13.90 to $1155.40 an ounce.

Attention then turned to Federal Reserve's Ben Bernanke and a speech delivered to the Economic Club of Washington midday Monday. While the Fed head didn't seem to signal a change in monetary policy, and pledged to keep rates low for some time, he didn't offer investors much reason to cheer either. In fact, he said the economy still faces "formidable headwinds" -- like a weak job market, wary consumers, and tight credit.

In the end, the day's news didn't offer a lot of new information and the Dow Jones Industrial Average is down a few points in slow trading. With about an hour left to trade, the CBOE Volatility Index (.VIX) is up 1.02 to 22.27. Trading in the options market is on the slow side, with approximately 4 million puts and 5.2 million calls traded so far (a ratio of .76, compared to a 22-day average of .76.)

Bullish Flow

Advanced Micro (NASDAQ:AMD) is up 73 cents to $8.59 and, like NVidia (NASDAQ:NVDA) is benefiting from news that rival Intel (NASDAQ:INTC) is pulling out of a graphic chip program. AMD was also upgraded to OutPerform from Underperform with a $12 price target at Bernstein. 44K AMD calls traded by midday, or more than 2X the normal and 7X the number of puts. Looks like some investors are taking new positoins in Jan10 calls at the $11 strike, with 9600 traded and 92 percent hitting ask-side. Dec 9, Jan 9, and Jan 12.5 calls are among the most actives as well. AMD is up 61.5 percent since announcing a settlement of anti-trust disputes with Intel less than a month ago. Implied volatility (average) is up to 82.8 from 72.3 during that time, up from 79.5 late Friday.

The PowerShares Dollar Fund (NYSEARCA:UUP) is flat at $22.48 and one player bought 20K Jan 23 calls at 24 cents apiece today. 43K now traded vs. 75.6K in open interest. Dec, Mar, and Jun 23 calls are among the most actives as well. After hitting 20 month lows of $22.02 in late November, the bullish dollar fund has staged a modest 2.5 percent comeback, and there has been heavy interest in calls at the $23 strike during the recent rebound. The action continues today.

Bearish Flow

Adobe (NASDAQ:ADBE) saw a spike in shares and options volume just before 11:30 eastern time. Shares fell 25 cents over the course of the minute on an uptick in volume. At the same time, sweeps of 4234 Dec 37 puts and 4057 Dec 36 puts traded ask-side for $1.10 and 70 cents, respectively. ISEE data hints at non-customer buyers. Average implied volatility is edging a bit higher, to 36.9 from 35.6 late Friday. No news on the software maker. Earnings due out on Dec 15.

Implied Volatility Movers

The CBOE Volatility Index (.VIX) is trading higher, as stocks slip in late-day action Monday. VIX is up 1.16 to 22.41 and, although the S&P 500 has traded in a narrow range of less than 10 points today, the rise in the VIX might be an early indication that volatility will pick up a bit in the days, weeks ahead.

Implied volatility is also higher in MGM (NYSE:MGM), AMD, and AsiaInfo (NASDAQ:ASIA). Meanwhile, implied volatility is lower in St. Joe (NYSE:JOE), Wells Fargo (NYSE:WFC), and Akamai (NASDAQ:AKAM).

Unusual Volume Movers

Barrick Gold (NYSE:ABX) is seeing 2X average daily trading volume, with 93,000 contracts traded and call volume representing 65 percent of today's activity.

NVidia (NVDA) is seeing 2X average trading volume, with 57,000 contracts traded and call volume representing 68 percent of today's trading activity.

Bristol Myers (NYSE:BMY) is seeing 3X normal trading volume. 247,000 contracts have traded, with call options representing 52 percent of today's volume.

Unusual volume (two times or more than normal average volume) is also being seen in Terra Industries (TRA), NY Bancorp (NYB), and JDS Uniphase (JDSU).

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