Friday Options Recap

by: Frederic Ruffy


Stocks are holding steady after economic data released Friday morning showed bigger-than-expected increases in retail sales and consumer sentiment. A report released before the opening bell on Wall Street showed retail sales jumping 1.3 percent in November. The headline number was more than double what economists expected (.6 percent) and much better than the 0 percent from the month before (revised down from .2 percent). Ex-autos, sales rose 1.2 percent, compared to estimates of .4 percent

Separate data from the University of Michigan released about 30 minutes into the trading session, surprised economists as well. The U of M consumer sentiment index showed an uptick to 73.4 in December, up from 67.4 last month and better than the 68.8 economists had expected.

Although the strong data triggered gains in the dollar (and the euro faltered, sending gold and oil lower), the stock market averages held steady and the Dow Jones Industrial Average is up 60 points heading into the final hour. Crude is off 87 cents to $69.67 a barrel and gold gave up $8.70 to $1117.50 an ounce. The CBOE Volatility Index (.VIX) slipped .64 to $21.68. Trading in the options market is slowing ahead of the weekend, with approximately 4.1 million puts and 5.4 million calls traded so far (a ratio of .77, compared to a 22-day average of .75.)

Bullish Flow

AMR (NASDAQ:AMR) is up 56 cents to $7.60 amid relative strength in the airlines (UAUA, CAL, DAL, ALK, JBLU). In AMR options, trading is active, with 28K calls and 6,700 puts on the tape so far. Morning trades include multi-exchange sweeps of 8,449 Jan 7.5 calls at the offer of 55 cents and 5,100 Dec 8 call at the offer of 10 cents. 14,549 Jan 7.5s and 7,624 Dec 8 calls now traded.

Delta Airlines (NYSE:DAL) has seen an impressive rally ahead of the company's Analyst Day next Tuesday. Trading in DAL options is heating up as well, with 35K calls and 7470 puts traded. Recent trades include a multi-exchange sweep of 8148 Mar 13 calls at the offer for 80 cents, which looks like an opening buyer.

Bearish Flow (NASDAQ:EBIX), a business software company serving the insurance industry, is down $2.16 to $46.90 and options volume is running 7X the normal. Most of the action hit put-side of the options chain and includes 1700 Jan 45s (86 percent ask-side) and 1090 Jan 40s (95 percent ask-side.) Aveage implied vols are up to 59.3 from about 55.5 late yesterday, as the stock extends a three-day 7.9 percent slide. EBIX has now lost 13.45 percent since Monday. No news today. The company updated its 2010 and 2011 growth rate forecasts yesterday, before the bell.

Implied Volatility Movers

IMS Health (RX) is down $2.81 to $18.55 and options volume is 18X the average daily. Although there are no headlines on the company, Briefing notes that an AP article out last night said that, under a new proposal unveiled by two Senate Democrats, drug companies would no longer be able to mine records and track which doctors are prescribing their medications — link to story on our web site. IMS Health, Verispan and other companies have created a multi-million dollar industry gathering such data and selling it to pharmaceutical companies. IMS is taking a hit and it appears that sellers of Dec 20 calls are leading the flow. 6620 traded so far. Dec 17.5 puts, May 22.5 calls, and Dec 17.5 calls are busy as well. Consequently, there was a huge spike in implied volatility, to about 80, from 30 the day before.

Unusual Volume Movers

Powershares US Dollar Fund (NYSEARCA:UUP) is seeing 7X average daily trading volume, with 432,000 contracts traded and call volume representing 99 percent of today's activity.

JP Morgan (NYSE:JPM) is seeing 2X average trading volume, with 267,000 contracts traded and calls representing 82 percent of today's trading activity.

iShares Japan Fund (NYSEARCA:EWJ) is seeing 11X normal trading volume. 127,000 contracts have traded, with call options representing about half of today's volume.

Unusual volume (two times or more than normal average volume) is also being seen in Best Buy (NYSE:BBY), Alcoa (NYSE:AA), and Broadcom (BRCM).