Tuesday Options Recap

by: Frederic Ruffy


Stocks opened broadly higher after the three-day weekend, but trading has slowed a bit and market is mixed heading into the final hour. The early focus was on overseas markets after stocks rallied across Europe and parts of Asia. UK’s FTSE paced the advance with a 2.9 percent gain. The domestic news was less bullish, however, after the ISM Services Index unexpectedly fell to 53.8 in June, down from 55.4 the month before and well below expectations of 55. The tone of trading remained positive through midday despite the data. However, another wave of selling pressure surfaced in afternoon action and the Dow Jones Industrial Average is now flat, down 172 points from its best levels. There doesn’t seem to be one specific catalyst for the late day decline. Boeing (NYSE:BA), Home Depot (NYSE:HD), and BofA (NYSE:BAC) are the biggest losers in the Dow. The CBOE Volatility Index (.VIX) hit a low of 27.96, but was recently up .71 to 30.83. Trading in the options market is running about the typical pace, with 5 million puts and 6.3 million calls have traded across the eight options exchanges so far.

Bullish Flow

Bullish flow detected in Tellabs (NASDAQ:TLAB), with 8065 calls trading, or 4x the recent average daily call volume. Shares are up 3 pennies to $6.50 and the focus is on Sep 7.5 and 9 calls. 7.5s are most actives, with 6674 traded (55 percent Ask). Some of the activity might be closing, as open interest is 18.4K and the second biggest in TLAB behind the Jul 7 put. Nevertheless, implied volatility is up about 11 percent to 58 and, according to WhatsTrading.com Flow Monitor, directional sentiment based on total flow is 53 percent bullish. No news on the stock. Earnings due out late July.

Allstate (NYSE:ALL) is off 35 cents to $27.93 and the Jun 35 - 36 call spread is bought at 18 cents, 5000X. Looks like traded several times as volume is approaching 9000. While it's possibly closing, it could possibly add to a position from June 15 when the same spread traded at 27 cents (22886 35s at $1.02 cents X 25000 36s at 75 cents traded at that time)

Bearish Flow

Arena Pharmaceuticals (NASDAQ:ARNA) is up 3.6 percent to $4 and one player pays a dime for July 3 puts, 4583X on CBOE. Another block of 4000 traded at a dime on ISE, which also looks like a buyer. 9000 now traded. Implied volatility is down 2.5 percent to 108 and the action might be offsetting, as open interest in the July 3 puts is in excess of 45K and the largest position in the name.

Implied Volatility Mover

Ctrip.com (NASDAQ:CTRP), the Shanghai, China, travel services company, is down $5 to $33.07 and implied volatility is higher on reports Chinese airlines have cut the commissions paid to travel agents. The news was apparently reported on Yicai.com. CTRP was tripped up on the news and options volume is 4X the average daily, with about 12K puts and 5000 calls traded. The action includes the well-timed purchase of 1532 July 37 puts at $1.60. It traded early before the stock started selling off (printed late). Meanwhile, implied volatility is rallying about 15 percent to 70.

Unusual Volume Movers

Marvell Tech (NASDAQ:MRVL) options volume is running 4.5X the average daily, with 85,000 contracts traded and call volume representing 90 percent of the total volume.

Fifth Third (NASDAQ:FITB) options volume is 6X the recent average levels, with 41,000 contracts traded and put volume accounting for 94 percent of the volume.

Home Depot (HD) options volume is 2X the average daily, with 61,000 traded and call volume representing 83 percent of the activity.

Unusual volume is also being seen in Allstate (ALL), Arena Pharmaceuticals (ARNA), and Genworth (NYSE:GNW).

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