Thursday Options Recap

by: Frederic Ruffy


Stocks are mixed in a day of slow market action Thursday. The underlying tone of trading was positive at the open after the Labor Department reported that filings for jobless benefits fell by 17,000 to 421K in the first week of December. Economists were looking for a decline of about 9,000. Steady trading in Europe and in the bond pits seemed to help keep a floor under stock prices in early action as well. From there, trading has been very narrow and without much volatility. The Dow Jones Industrial Average has traded in an 80-point range and is down 23 points heading into the final forty minutes. The NASDAQ has added 5.6. The CBOE Volatility Index (.VIX) slipped .23 to 17.51. Options volume is lighter than recent days and reflects the bullish underlying sentiment that has resurfaced during the month of December. 7.4 million calls and 5 million puts traded so far.

Bullish Flow

Sirius XM Rario (NASDAQ:SIRI) adds 7 cents to $1.39 and some serious call buying is seen in the name Thursday. 38000 contracts traded so far, which is 3X normal and compares to put volume of 8,130 contracts. May 1.5 calls are the most actives. 7,625 traded (79 percent Ask). Jan 1.5, Jan12 $1, and Jan12 $2 calls are busy as well. Shares, which traded lower yesterday after the company's CFO said no share buybacks till second quarter of 2012, are up today after radio show host Howard Stern agreed to extend his contract five more years.

AIG shares are up $2.64 to $44.86 and options order flow is bullish on news the company will repay the Federal Reserve and Treasury with proceeds from the sale of two units. AIG will pay off a $21 billion credit line from the Fed. Meanwhile, the govt will convert its AIG stake to common stock and sell it to a group of private investors. Options volume surged on the news, with 26000 calls and 11000 puts traded in the name so far. Two-thirds of the action is in the front-month options that expire at the end of next week. Dec 43, 44, 45, 46, and 47 calls are the most actives. Dec 40, 41, 42 and 44 are the most active puts.

Bearish Flow

Airgas (ARG) is seeing heavy trading after Air Products (NYSE:APD) raised its offer for the company to $70 per share. ARG is trading down $3.59 to $62.38 after APD also said the offer, which represents a 7 percent increase to the initial bid, is its best and final offer. 51000 calls and 21000 puts traded in ARG on the news. The top trade is a Jan 65 – 70 (1X2) call ratio spread, apparently sold at $2.55 and perhaps rolling or closing a position. Another investor apparently paid $1.40 for the Jan 60 – 65 put spread, 1000X. A Dec 55 – 70 call spread was apparently sold at $10.55, 1000X. ARG implied volatility is up 10.5 percent to 41.5 and the overall options order flow, along with the decline in ARG share price, seem to reflect diminishing expectations that a deal will actually take place.

Implied Volatility Mover

Quicksilver (NYSE:ZQK) adds 30 cents to $4.93 and options order flow is bullish after French newspaper La Tribune reported that PPR Chairman and CEO Francois-Henri Pinault is interested in buying the Huntington Beach, CA apparel maker. The top options trade is a lot of 135 Dec 5 calls at the 15-cent ask price. 468 traded. Jan and Feb 6 calls are seeing interest as well. Implied volatility is up 7 percent to 61.