Wednesday Options Recap

by: Frederic Ruffy


Major averages fell in morning trading on mixed earnings and economic news, but have battled off session lows late Wednesday. The tone of trading was cautious early after a number of companies, including Conoco (NYSE:COP), Sprint (NYSE:S), and Dr. Pepper (NYSE:DPS), fell on earnings results. Meanwhile, strength in the buck weighed on crude oil and gold, which put pressure on many of the commodity-related names.

The economic news was mixed. Data released pre-market showed Durable Goods up 3.3 percent in September, which was better than the 1.8 percent increase that economists had expected. However, excluding transports, orders fell .8 percent. Separate data released later showed New Home Sales at an annual rate of 307,000 in September, from 288,000 in August and slightly better than the 299,000 that economists expected. Yet, earnings worries and jitters ahead of next week's event risk (FOMC rate announcement and November elections) seem to be weighing on sentiment. The Dow Jones Industrial Average is off 92 points and 57 points from session lows. The NASDAQ lost 4.5. CBOE Volatility Index (.VIX) added .76 to 27.12. Trading is active, with 6.5 million calls and 5.9 million puts traded so far.

Bullish Flow

Dell (DELL) adds 12 cents to $14.63 and more than 20,000 November 14 calls traded on the computer maker so far. Most of the action was in two blocks. 9000 traded at 90 cents at 9:30 on ISE and, an hour later, another block of 8,174 traded at 88 cents, also on the ISE. Sentiment data indicate that both are opening customer buyers. Implied volatility is up 5.5 percent to 37, even as there is no news on the ticker and shares are up modestly on the session. DELL last reported earnings on August 19 and therefore the next report might fall outside of the November expiration. No date has yet been announced.

Bearish Flow

Pfizer (NYSE:PFE) lost 21 cents to $17.28 and a noteworthy trade in the options today is a block of 58K December 17 calls, sold at 69 cents per contract, 58000X on AMEX. It might offset a position from July 15. At that time, 50K traded at 30 cents (account swap). Shares are up 16.2 percent since that time. 61K Dec 17 calls now traded vs. 134.2K in open interest.

Implied Volatility Mover

Nabors (NYSE:NBR) adds $1.04 to $20.48 and 7,900 calls traded on the oil driller after the company reported a 29-cent per share quarterly profit, which beat Street estimates by 6 cents. November 19 calls are the most actives and might be seeing some liquidating trades on the news. Open interest in the contract increased by 2870 following a day of active trading yesterday. 2885 traded so far today. November 20 and December 25 calls are also active and trading predominantly on the bid. Implied volatility is down about 7 percent to 40.5. Bullish pre-earnings action in Avon Products (NYSE:AVP). Shares are up 26 cents to $33.19 and 17,600 calls traded in the name, or 3X the recent average daily.

Unusual Volume Movers

Bullish flow detected in AmerisourceBergen (NYSE:ABC), with 6826 calls trading, or 7x the recent average daily call volume in the name.

Bearish activity detected in Corning (NYSE:GLW), with 74791 puts trading, or 15x the recent average daily put volume in the name.

Increasing options activity is also being seen in Monsanto (NYSE:MON), Marvell Tech (NASDAQ:MRVL), and Sprint (S).