Monday Options Recap

|
Includes: ALL, AMAT, CAT, ETFC, MU, NFLX, NVDA, ODP, RCL, VLO
by: Frederic Ruffy

Sentiment

Stocks are trading mixed on a slow news day Monday. Caterpillar (NYSE:CAT) is helping the Dow Jones Industrial Average after the maker of earth moving equipment reported a quarterly profit of 50 cents per share, which beat Street estimates by 11 cents. The company also raised its 2010 forecast and said the economy is definitely improving. However, Humana (NYSE:HUM) slipped on earnings and Citi (NYSE:C) shares lost 3.5 percent after the US Treasury approved plans to sell part of the government's stake in the company.

With no economic data to guide the action, the focus on stock news has resulted in a day of uneventful and mixed market action. The Dow has traded in a 70-point range and is up 17 heading into the final hour. The tech heavy NASDAQ is flat heading into earnings from Texas Instruments (NYSE:TXN), due after the closing bell. The CBOE Volatility Index (.VIX) edged up .67 to 17.29. Trading in the options market is running about the normal levels, with 6.9 million calls and 4.7 million puts traded so far.

Bullish Flow

Etrade Financial (NASDAQ:ETFC) is up a nickel to $1.95 and call option volume is running 9X the norm, after 58,000 contracts traded so far Monday. The top trade is 23,661 Oct 2 calls on the 26 cent bid price, which might have been tied to a block of 1.3 million shares at $1.95 and or a liquidating trade. Open interest is 74.1K and the third largest position in ETFC (behind Jan 2.5 and 5 calls). Meanwhile, May 2 and Jul 2 calls have traded 12,200 and 8045X, respectively (56% Ask). Implied volatility is up about 4 percent to 58, up from 54 shortly after the online broker reported its 11th straight quarterly loss last Wednesday.

Micron Technology (NASDAQ:MU) is off 3 cents to $10.97 and a block of 10K May $10 calls at $1.13 on the ISE is an opening customer buyer, according to sentiment data. It was probably tied to a block of 500K shares at $10.90 that traded at about the same time. The chipmaker last reported earnings on April 1 and shares have not done much since then. This strategist might be looking for an uptick in volatility over the next few weeks. Implied volatility is coming off 52-week lows, up about 4.5 percent to 44.5.

Bearish Flow

Applied Materials (NASDAQ:AMAT) is down 8 cents to $14.39 and 17K May 14 calls traded. One player sold 6000 at 70 cents each. Two other blocks, totaling 8470 contracts, traded at 73 cents and also look like sellers, possibly liquidating positions. Open interest is 29K and AMAT has been facing resistance around $14.50 for the past 10 days or so. Implied volatility is up about 6.5 percent to 32.5. Earnings expected around May 19.

Implied Volatility Movers

Office Depot (NYSE:ODP) calls are busy for a second day. Open interest increased by 6,100 following a day of action in May 8, May 9, and June 9 calls Friday. Today, shares added 55 cents to $9 after Credit Suisse upgraded ODP to Outperform from Neutral ahead of tomorrow morning's earnings release. About 11K calls and 1285 puts traded so far. May 8, 9 and 10 calls are the most actives. June and Oct 10 calls are seeing interest as well. Implied volatility is up about 3.5 percent to 63, up 19 percent since Thursday.

Unusual Volume Movers

Royal Caribbean (NYSE:RCL) options volume is running 7X the usual, with 86,000 contracts traded and put activity representing about 92 percent of the activity.

Caterpillar (CAT) options activity is running 2X the usual, with 79,000 contracts traded and call volume representing 57 percent of the volume.

Allstate (NYSE:ALL) options volume is running 4X the usual, with 76,000 traded and call volume representing 97 percent of the activity.

Unusual volume is also being seen in Netflix (NASDAQ:NFLX), Nvidia (NASDAQ:NVDA), and Valero (NYSE:VLO).