Wednesday Options Recap

|
Includes: ICE, SEED, SLV, XPER
by: Frederic Ruffy

Sentiment

The major averages opened lower and have traded in another narrow range, with light volume and no real news to move things one way or the other Wednesday. Some economic data was in focus early after the Chicago PMI showed improvement in manufacturing activity, moving up to 60 in December from 56.1 and significantly better than the 55.1 that economists were expecting.

Yet, the market showed little reaction to the data and the major averages were flat midday. A modest round of selling surfaced a little later after the NASDAQ was evacuated because of a suspicious van parked outside. However, it proved to be a false alarm and the NYPD allowed employees back in about 20 minutes later.

In the end, there just wasn't anything in today's news to send stocks dramatically higher or lower. Consequently, the S&P 500 has traded in another narrow 5-point range and is down 1.9 heading into the final hour. The CBOE Volatility Index (VIX) edged up .24 to 20.25. Trading in the options market remains light, with 3 million puts and 3.6 million calls traded so far (a ratio of .84, compared to a 22-day average of .69.)

Bullish Flow

Origin Agritech (NASDAQ:SEED), sees a morning spike on news it has completed a Second Notes Repurchase Agreement as of today with Citadel. Investors seem to like the news (short covering is helping as 27 percent of SEED is held short) and the stock is up $1.17 to $10.85 Wednesday morning. Options action is heating up as well, with 3790 calls and 905 puts now traded. Jan $10, 11, 12.5, and 15 (2010s) are the most actives.

ICE heated up momentarily, but has given up most of the gains and, after hitting an intra-day high of $114.93 in early-afternoon action, is now up 82 cents to $113.42. No news to explain the afternoon spike, but some call buyers surfaced. One lifted 1044 Jan 110 calls at $4.60 in a sweep when shares were still trading below $113. 6420 calls and 720 puts now traded, or 2X the average daily for ICE.

Bearish Flow

iShares Silver Fund (NYSEARCA:SLV) puts are heavily traded for a second day. 185,000 contracts traded yesterday. Today, silver is down 33 cents to $16.77 and adding to yesterday's 46 cent loss. Consequently, SLV is off 34 cents to $16.47 and another 88K puts traded, compared to 14K calls. A lot of the activity is in the front month and appears closing. For instance, a Jan - April 14 put spread traded 10000X at 37 cents on the ISE and, like yesterday, appears to be some rolling (buying April to open) of out-of-the-money puts to the April expiration.

Implied Volatility Movers

Tessera Tech (TSRA) is down $1.95 to $21.94 after the ITC ruled that the company's three patents are valid, but that the company's expert was insufficient to prove infringement on two of the asserted patents. Shares are lower and options volume is 9X the average daily, with sellers of Jan 22.5 puts and calls leading the flow. About 5,500 traded (70 percent bid-side) and implied volatility is falling to the mid-40s, down 14 percent, now that the event risk has passed.