Monday Options Recap

by: Frederic Ruffy


The major averages traded in a narrow range and are modestly lower late Monday. With no economic news or earnings to guide the morning action, the early focus was on overseas markets, where benchmarks were mixed in Asia and modestly higher in Europe.

The Dow Jones Industrial Average opened steady as well, but the early gains had dissipated by midday and the Dow was under water by early afternoon. The decline is orderly, however, and led by a 1.6 percent decline in Alcoa (NYSE:AA) and a 1.5 percent drop in American Express (NYSE:AXP).

The Dow has traded in a narrow 46-point range and is down 4 points heading into the final hour. The CBOE Volatility Index (.VIX) edged up .68 to 20.15 ahead of data on home prices and consumer confidence tomorrow morning. Trading in the options market remains light, with approximately 2.7 million puts and 4.3 million calls traded so far (a ratio of .63, compared to a 22-day average of .69.)

Bullish Flow

Fannie Mae (FNM) is up 17 cents to $1.22 and 18K calls traded in the first 90 minutes, or about 22X the number of puts, after the Treasury Department amended terms of its agreements with both FNM and Freddie (FRE) to help support their ongoing stability. Shares are up and, while some players are looking for additional upside in FNM Jan and Mar 1.5 calls, June 1 and Jan (2012) 1 calls are the most actives. The spread traded about 5000X on ISE and appears to be a roll of short calls from Jun to Jan 2012, paying 38 cents to close Jun and collecting 52 cents to open Jan 2012s. It might be an adjustment to an over-write strategy.

Bearish Flow

Big Prints in the SPYders (NYSEARCA:SPY) Monday, after 10,000 Jan 100 - 108 put spreads were sold at 36 cents each and, a few moments later, 10,000 Jun 95 - 105 put spreads bought at $2.14. Looks like a roll of a hedge from Jan 100 - 108 spread to Jun 95 - 105s. SPY is up 14 cents to $112.62.

Implied Volatility Movers

STEC (NASDAQ:STEC), a Santa Ana, Cali storage device maker, is up 8.7 percent to $17.07 on no obvious news. Options action is brisk as well, with 22,000 calls and 6,915 puts traded. Jan 15 and 17 calls are the most actives, about half trading ask-side. Implied vols have lifted to about 72, up about 7.4 percent since late last week.

Unusual Volume Movers

Sandisk (SNDK) is seeing 2X average daily trading volume, with 49,000 contracts traded and call volume representing 57 percent of today's activity.

IAC Interactive (IACI) is seeing 60X average trading volume, with 24,000 contracts traded and puts representing 100 percent of today's trading activity.

Citrix Systems (NASDAQ:CTXS) is seeing 8X normal trading volume. 23,000 contracts have traded, with call options representing about 55 percent of today's volume.

Unusual volume (two times or more than normal average volume) is also being seen in Alcon (NYSE:ACL), Nabor's (NYSE:NBR), and JDS Uniphase (JDSU).