Thursday Options Recap

by: Frederic Ruffy


The major averages are poised to finish little changed after a seesaw session Thursday. The Dow Jones Industrial Average opened higher with help from better-than-expected weekly jobless claims numbers (-11K vs. –4K consensus) and positive earnings from Dow component Exxon Mobile (NYSE:XOM). However, the early gains faded fast and the Dow was deep under water through midday. At its worse levels, the industrial average was down 110 points. However, with help from some end-of-month position squaring, the Dow is back into positive territory and, with 45 minutes left to trade, is up 20 points. The CBOE Volatility Index (.VIX) hit a high of 25.54, but was recently down .90 to 23.35. Trading is active, with about 5.6 million calls and 5.1 million puts traded so far.

Bullish Flow

The top two options trades so far today are in Citi (NYSE:C) after a strategist sold 22,429 Jan2012 puts at the 4 line to buy 23,000 Jan12 calls at the 7.5 strike. They collected a 61-cent credit (as if one-to-one) on this bullish risk-reversal and are possibly willing to buy the stock at $4 through the 2012 expiration. The trade was tied to 1.3 million shares at $4.09. Implied volatility in Citi is down 2.5 percent to 34.5 today, compared to a 52-week high and low of 82 and 32.75. Shares are up fractionally today on news Citi has agreed to pay $75 million to settle regulatory charges with the SEC.

Marvell Tech (NASDAQ:MRVL) lost 62 cents to $14.75 and is falling to its lowest levels since late-2009. Shares are now down almost 35 percent since late-April. Some options players seem to view today’s weakness as an opportunity for bullish trades. 46K calls traded in the name, or 4.5X the expected volume and 3X the number of puts traded. The action has been in smaller lots. The top trade is a Sep 15 – 18 call spread apparently bought at 73 cents, 975X on CBOE. Meanwhile, on the ISE, where 32 percent of today’s MRVL options have traded, sentiment data points to 53 percent opening customer buyers, or 7258 calls bought-to-open so far. Implied volatility is up 7.5 percent to 41.5. Next earnings due late August.

Bearish Flow

MetLife (NYSE:MET) and Prudential (NYSE:PRU) puts are actively traded ahead of earnings from MetLife (at the close) and on news NY Attorney General Cuomo is investigating the two companies in connection to claims paid to grieving military family members. MET options activity is 2.2X the average daily, with about 14K puts and 6,480 calls traded. Shares are up $1.12 to $40.42 and implied volatility rose 2.5 percent to 38.5. Meanwhile, about 10K puts and 2,170 calls traded in PRU. Shares are up 93 cents to $56.37 and implied volatility is up 5.5 percent to 40. (Possibly related, Manulife (NYSE:MFC) put volume 116X normal and implied volatility up 20 percent to 41.8). So, although shares don’t seem to be reacting to the news, the action in the options market seems to reflect expectations for heightened volatility in the life insurance names.

Implied Volatility Mover

Akamai (NASDAQ:AKAM) stumbled, and is down $5.42 to $38.61, post-earnings and options volume is running 6X the average daily. 45K calls and 31K puts traded in the name. AKAM posted second quarter numbers that met expectations and offered in-line guidance for the third quarter. Implied volatility is down 12 percent to 44 following the news.

Unusual Volume Movers

Bearish activity detected in Xilinx (NASDAQ:XLNX), with 13093 puts trading, or 3x the recent average daily put volume in the name.

Bearish activity detected in Garmin (NASDAQ:GRMN), with 5158 puts trading, or 3x the recent average daily put volume in the name.

Bullish flow detected in Louisiana Pacific (NYSE:LPX), 7525 calls trading, or 3x the recent average daily call volume in the name.

Increasing volume is also being seen in Transocean (NYSE:RIG), Nvidia (NASDAQ:NVDA), and Potash (POT).