Friday Options Recap

by: Frederic Ruffy


Stocks are mostly higher despite a round of mixed economic news Friday. Data released before the bell showed the Consumer Price Index [CPI] up .6 percent last month, which was slightly hotter than the .5 percent increase that economists had expected. A separate report showed December Retail Sales up .5 percent and .1 percent less than expected. The University of Michigan Sentiment Index fell to 72.7 in January, from 74.5 at the end of December and well short of expectations (75.5). On a brighter note, Industrial Production rose .8 percent and twice as much as expected. However, economic news is beginning to take a backseat to earnings and fourth quarter reporting gets in full swing next week. JP Morgan (NYSE:JPM) is up 2 percent and one of the best gainers in the Dow Jones Industrial Average after the bank reported earnings that topped estimates. The Dow is up 50 points heading into the final hour. The tech-heavy NASDAQ added 15 after Intel (NASDAQ:INTC) reported profits that topped expectations. The CBOE Volatility Index (.VIX) lost .94 to 15.45. Options action reflects the bullish underlying sentiment, with 10 million calls and 5.9 million puts traded so far.

Bullish Flow

Corinthian Colleges (NASDAQ:COCO) options are active for a second day. Speculative call buying was seen yesterday. Today, shares are up 44 cents to $5.16 after RBC raised the stock to Outperform from UnderPerform. 9,790 calls and 430 puts already traded on the for profit education company. The top trade is a block of 4740 Feb 6 calls at 20 cents when market was 20 to 30 cents. Might be a liquidating trade. 5,078 now traded vs. 8,868 in open interest. Jan. 5 calls have traded 1330X and are the second most actives. Implied volatility is elevated at 85, but not much changed so far today.

Steve Smith notes today that: Shares of Williams (NYSE:WMB), the natural gas company, has seen shares jump some 13% in the past week to $26.60 and have added 75% since the August lows. Today’s option volume is 6x the daily average driven by spreading in calls in what looks like a roll of a bullish position. Notable trades are in the Jan $12.50 calls and May $17 calls which have each traded 35,000 contracts each. Looks like sale to close Jan. purchase to open the May position.

Bearish Flow

BP shares saw an afternoon spike and are trading up $1.77 to $49.30 on news reports the oil giant could enter a share swap with Russia’s Rosneft (OTC:RNGZY). Options action is heating up as well, with 99000 calls and 58000 puts traded in BP so far. Jan 47 puts are the most actives. 20,390 traded (58 percent Ask) vs. 4,400 in open interest. Some investors might be buying Jan puts on the view the gains won’t hold through next week’s expiration. However, Jan 48, Jan 49 and the Weeklys (1/14) $48 calls are busy as well and trading predominantly at the ask.

Implied volatility Mover

Nanometrics (NASDAQ:NANO) is up 29.5 percent to $17.42 and implied volatility is moving higher along with the share price. The chip equipment maker is up on Intel's guidance. Intel is a 10 percent customer. is also saying that "Piper Jaffrey (NYSE:PJC) issued a positive outlook for the company amid a super cycle in chip equipment." Shares surged today and options volume includes 5,570 calls and 1,380 puts. Jan 16 calls, which are now $1.42 in-the-money, are the most actives. 1,870 traded (76 percent ask). Implied volatility is rallying as well, up 31 percent to 68.

Bullish flow detected in ITT, with 15134 calls trading, or 9x the recent avg daily call volume in the name.

Bullish flow detected in Encana (NYSE:ECA), with 10593 calls trading, or 3x the recent avg daily call volume in the name.

Bullish flow detected in Aetna (NYSE:AET), with 21516 calls trading, or 10x the recent avg daily call volume in the name.

Increasing volume is also being seen in Barrick Gold (NYSE:ABX), El Paso (EP), and Suncor Energy (NYSE:SU).

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