Friday Options Recap

by: Frederic Ruffy


Stocks have traded in a narrow range following a mixed January jobs report Friday. The data, released before the bell, showed the U.S. economy adding 36,000 jobs in the first month of 2011. Economists were looking for an increase of 145,000. Yet, the unemployment rate unexpectedly fell to 9 percent, from 9.6 percent and significantly better than the 9.5 percent that was expected. Also, average hourly earnings increased by .4 percent and double what was expected. Bonds reacted violently to the news and the benchmark ten-year Treasury lost 25/32nd. The yield on the ten-year is running north of 3.65 percent for the first time since early-May of last year. Still, volatility in the bond pits failed to stir a similar action in the stock market. With less than an hour till the closing bell, the Dow Jones Industrial Average has traded in a narrow 56-point range and is up 10 points. The tech-heavy NASDAQ is seeing relative strength, up 12.6 points. The CBOE Volatility Index (.VIX), which closed above 20 on Egypt fears one week ago, is down .49 to 16.20. Trading in the options market is slowing ahead of the weekend. 7. 4 million calls and 6 million puts traded so far.

Bullish Flow

Radioshack (NYSE:RSH) adds 47 cents to $15.66 and options volume is 3.5X the average daily amid unconfirmed chatter of involvement from an activist investor — Briefing. 12,000 calls and 2,620 puts have traded in the electronics retailer. Short-term speculators are focused on Feb 16 calls. 6,115 traded (63 percent Ask). Feb and Mar 17 calls are actively traded as well. Implied volatility is up 8 percent to 39.5.

PowerShares DB Dollar Bearish Fund (NYSEARCA:UDN) loses a dime to $27.40 and it appears that one strategist sells the Sep. 27 straddle (puts and calls) at $1.75 and $1.80, a total of 25000X today. The position looks opening and a bet that the bearish fund will slip towards $27 through September, which would be a moderately bullish play on the dollar.

Bearish Flow

United Rentals (NYSE:URI) touches a new 52-week high and is up 71 cents to $30.48. Put volume is picking up late Friday, including two blocks of Feb 28s (2X1348) for 30 and 35 cents when the market was 20 to 35 cents. 5,179 now traded vs. 280 in open interest. Looks like some investors are buying to open new positions in Feb 29 and Mar 28 puts as well. Implied volatility is up 2.5 percent to 40.5. Shares are up an impressive 245 percent since early July and some investors might be buying puts to protect recent gains ahead of the company's Investor Day, Feb. 11.

Implied volatility Mover

Heavy post-earnings trading in Las Vegas Sands (NYSE:LVS). Shares are trading down $3.27 to $47 early Friday after the casino operator reported earnings that topped Street views, but revenues fell short of expectations. 84,000 calls and 36,000 puts traded in LVS during the first thirty minutes of Friday’s session. The top trade is a block of 1,500 Feb 50 calls at 66 cents on ISE at 9:40. It was an opening customer buyer, according to ISEE data, when the stock was at $47.21. Falling implied volatility and a 21 cent drop in the stock price later, the calls are bid at 55 cents. 9,379 traded. Feb 60 calls are the most actives. 11,046 traded (62 percent ask) vs. 4,256 in open interest. Feb 47, 48, 55 calls, and the 2/4 Weekly $48 calls, are seeing brisk trading as well. Implied volatility is down 18.5 percent to 44 and not far from 52-week lows of 43.5 (52-week high is 87.5).

Unusual Volume Movers

Bullish flow detected in Avalon Rare Metals (AVARF.PK), with 2392 calls trading, or 3x the recent avg daily call volume in the name.

Bullish flow detected in Covanta (NYSE:CVA), with 9250 calls trading, or 29x the recent avg daily call volume in the name.

Bearish activity detected in Starwood Hotels and Resorts Worldwide (HOT), with 4800 puts trading, or 2x the recent avg daily put volume in the name.

Increasing volume is also being seen in Cisco (NASDAQ:CSCO), Las Vegas Sands, and Marvell Tech (NASDAQ:MRVL).