Friday Options Recap

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Includes: CEPH, CMTL, CREE, DELL, DTG, HIG, HTZ, RIG, SNY, STEC
by: Frederic Ruffy

Sentiment

Major averages are holding modest gains on a slow news day Friday. The only economic stat of the day was a report on wholesale inventories, which showed an increase of 1.3 percent in July and much higher than the .4 percent increase that economists had expected. The market showed little reaction to the data. The energy sector is seeing relative strength after the International Energy Agency raised its outlook for global oil demand, which sent crude bubbling $2.23 higher to $76.48 a barrel. Beyond that, there hasn’t been much to drive the market. With forty-five minutes left to trade, the Dow Jones Industrial Average has traded in a 66-point range and is up 43 points. The NASDAQ added 4.8. The CBOE Volatility Index (.VIX) is off .93 to 21.88. Trading is slowing, with about 6.2 million calls and 4.8 million puts traded so far.

Bullish Flow

Hertz (NYSE:HTZ) adds 19 cents to $10 after a Delaware Court denied an injunction to block the Hertz for Dollar Thrifty (NYSE:DTG) deal. Some fund managers and other institutional investors were trying to block a vote, saying DTG breached their fiduciary duty by not conducting an auction and seeking a better premium for the company. The ruling clears the way for a shareholder vote and makes it less likely that HTZ will need to raise its bid. At least one investor seems to view this as bullish for Hertz and bought 8,000 Dec 12.5 calls at 57.5 in morning trading. Total volume in the contract is now 13.2K vs. 1,344 in open interest.

Bearish Flow

Genzyme (GENZ) with a bearish three-way spread in recent trade. Shares are off a nickel to $70.58 and one investor apparently sold 4900 Jan 72.5 calls at $2.70 to buy the Jan 60 – 67.5 (2X1) put ratio spread at 55 cents, 4900X. This might be a hedge should deal talks between Sanofi (NYSE:SNY) and Genzyme fall apart. Dealreporter had a note yesterday speculating that SNY might raise its bid for GENZ to $75.

Implied Volatility Mover

Short-term speculators focused on STec (NASDAQ:STEC) Sep 12, 13, 15 calls amid more takeover chatter Friday -- Briefing. It's unsubstantiated and shares of the Santa Ana, CA storage device maker are up 21 cents to $11.80, down 3.1 percent from session highs. Approximately 13K calls and 1,062 puts changed hands. Implied volatility is up 14 percent to 63.

Unusual Volume Movers

Bullish flow detected in Hartford Financial Services Group (NYSE:HIG), with 20708 calls trading, or 3x the recent avg daily call volume in the name.

Bullish flow detected in Cephalon (NASDAQ:CEPH), with 4634 calls trading, or 4x the recent avg daily call volume in the name.

Bullish flow detected in Comtech Telecommunications (NASDAQ:CMTL), with 2478 calls trading, or 10x the recent avg daily call volume in the name.

Increasing options volume is also being seen in Transocean (NYSE:RIG), Cree (NASDAQ:CREE), and Dell (DELL).