Monday Options Recap

by: Frederic Ruffy


Major averages are holding modest gains in a day of slow trading Monday. With no economic data to guide the early action, some of the focus was back on Europe after the euro gave back recent gains against the buck. However, stock market averages were steady throughout the euro-zone and the lack of volatility across the Atlantic did bode well for early trading on Wall Street. Beyond that, there hasn’t been much market-moving news. Consequently the Dow Jones Industrial Average has traded in a tight 40-point range and is up 3 points in the final hour. The NASDAQ has added 5. The CBOE Volatility Index (VIX) is flat at 18.01. Trading in the options market reflects the bullish underlying sentiment of recent days, with about 6.2 million calls and 4.2 million puts traded so far.


Barnes and Noble (NYSE:BKS) adds $2.19 to $15.47 and options volume is running 6X the average daily after The Wall Street Journal reported that Borders (BGP) is interested in the book store chain. Activist investor Bill Ackman, who owns 37% of Borders, says he’ll finance the deal. BKS is up $2.25 to $15.53 and options volume is 6X the average daily. Two-way (buying and selling) trading is being seen in Dec and Jan calls with strikes ranging from 13 to 20. BGP jumped 41 cents to $1.49 and Jan 2 calls are seeing interest. 1000 traded at the ask. Feb and May 1 calls are seeing interest as well.

Radware (NASDAQ:RDWR) is running higher after an Israeli newspaper, Calcalist, suggested Riverbed (NASDAQ:RVBD) has made a $47 per share offer for RDWR, which is $2 better than H-Ps recent bid (unconfirmed). Oppenheimer analysts said today that Radware’s cloud and virtualization technology might make it an interesting acquisition target for other large networking names like Juniper (NYSE:JNPR) and Cisco (NASDAQ:CSCO). RDWR is up $6.27 to $39.03 on the takeover hopes and early options action includes 7,790 calls and 1,235 puts. Dec 40 calls are the most actives. 3700 traded and, with 51 percent trading on the bid, some players might be closing out positions on today’s news. Open interest is 9,096 and currently the second largest position in RDWR.

Bearish Flow

GM (NYSE:GM) adds 3 cents to $34.58 and one investor initiated a Jan 32 – 34 (2X1) put ratio spread at 15 cents, 2000X. Looks like a bearish play on the automaker (might also be closing or rolling) and comes after a 1.2 percent gain in GM since 11/18, the day of its IPO.

Implied volatility Mover

Rare Element (NYSEMKT:REE) adds $1.21 to $11.03 on talk Sumitomo is eyeing a stake in Rare Earth peer Molycorp (MCP). Speculators are showing interest in the name as well. 3573 Dec $11 calls traded (78 percent ask). Another 3541 Dec $10 calls changed hands (77 percent ask). The top trade is a lot of 448 Dec $10 calls at $1.05, and part of a sweep of 1,087 contracts. 10K calls and 2700 puts now traded in the name. Implied volatility is up 8 percent and elevated at 97.

Unusual Volume Movers

Bullish flow detected in Manitowoc (NYSE:MTW), with 2247 calls trading, or 3x the recent average daily call volume in the name.

Bullish flow detected in Molycorp (MCP), with 7873 calls trading, or 2x the recent average daily call volume in the name.

Bullish flow detected in Blue Coat System (NASDAQ:BCSI), with 4699 calls trading, or 3x the recent average daily call volume in the name.

Increasing volume is also being seen in Sprint (NYSE:S), Micron Tech (NASDAQ:MU), and Visa (NYSE:V).

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