Friday Options Recap

by: Frederic Ruffy


The major averages wavered at the open on mixed economic and earnings news, but have since moved higher and are in positive territory late Friday. The table was set for mixed trading after markets in Europe cheered Greece's decision to tap the IMF for aid, but data in the US showed orders for durable goods falling a greater-than-expected 1.3 percent in March. Meanwhile, a revenue miss sent Microsoft (NASDAQ:MSFT) and the NASDAQ lower, but better than expected earnings from American Express (NYSE:AXP) helped lift the Dow Jones Industrial Average.

At 10:00 a.m. eastern time, stock market averages started heading higher when new home sales numbers showed a surprise increase to an annual rate of 411,000 in March, up from 309,000 in February and much better than forecasts of 330,000. Shares of homebuilders, building material and a number of REITs rallied around the news. Trading was once again mixed midday, but late buying helped send the Dow up about 50 points in the final hour. The NASDAQ gained 6. Trading is slowing a bit, with 7 million calls and 5.4 million puts traded so far.

Bullish Flow

AspenBio Pharma (APPY) has been ripping higher in recent days, as investors await trial results for their flagship AppyScore, a blood-based test designed to aid in the evaluation of appendicitis, expected during the first week of May. Shares are up 50 cents to $3.80 and have rallied more than 50 percent on the week. Options activity has picked up with each day as well. 180 calls traded Monday, 81 Tuesday, 1,700 Wednesday, 1,820 Thursday, and 2,030 so far today. The action today is in the June and May 5 calls, with some investors buying to open positions ahead of the results. Implied volatility, which jumped from 122 to 217 Tuesday through Thursday, has eased back towards 200.

Yamana Gold (NYSE:AUY), the Toronto-based gold miner, is up 18 cents to $10.38 after gold reversed early losses and added $11.80 to $1154.10 an ounce. In AUY options, 27K calls traded in the name Friday. The volume represents 3X the typical activity and compares to 2224 puts. May 11 calls have traded more than 16K and includes several lots at the 17-cent asking price. May 10 and June 11 calls are seeing interest as well. Implied volatility is up about 3 percent to 34.5 ahead of a May 3 (after market) earnings report.

Bearish Flow

Transocean (NYSE:RIG) shares are down $2.20 to $88.09 and implied volatility in RIG options has been climbing after a massive Transocean oil rig, operated for a consortium led by BP, caught fire Wednesday, then sunk Thursday in 4500 feet of water. 11 workers are still missing and feared dead. The environmental impact is uncertain. The US Coast Guard said today that the Deepwater Horizon rig does not appear to be leaking. Nevertheless, the uncertainties are weighing on RIG shares and options volume is running almost 3X the expected for late-morning trading. 7500 calls and 7340 puts traded. The top trade is 444 May 95 calls at $1, a possible premium seller liquidating a position as the contract falls $7 out of the money. Meanwhile, implied volatility has risen another 6 percent to 33, from about 28 before the story broke Wednesday.

Implied Volatility Movers

Heavy trading continues as homebuilder Lennar (NYSE:LEN) launches higher Friday morning. Shares opened in positive territory and then saw a spike at 10:00 a.m. after the latest new home sales data showed a surprise jump to an annual rate of 411K (330K consensus). LEN is now up $1.89 to $21.63 and the June 20 calls have traded 2820X (98% Ask). May 22.5 calls traded 2395X (96% ask). A total of 11K calls and 10K puts traded so far. Implied volatility is up about 9 percent to 47.

Unusual Volume Movers (NASDAQ:AMZN) options volume is running 2X the usual, with 180,000 contracts traded and call activity representing about 57 percent of the activity.

Schlumberger (NYSE:SLB) options activity is running 3X the usual, with 95,000 contracts traded and put volume representing 59 percent of the volume.

Qualcomm (NASDAQ:QCOM) options volume is running 2X the usual, with 161,000 traded and call volume representing 59 percent of the activity.

Unusual volume is also being seen in Eastman Kodak (EK), Weatherford (NYSE:WFT), and Merck (NYSE:MRK).