Thursday Options Recap

Includes: CSCO, F, MDVN, QQQ
by: Frederic Ruffy


Stock market averages are trading mixed amid increasing options volume due to the expiration. After sliding 179 points Wednesday, the Dow Jones Industrial Average opened modestly higher on better-than-expected weekly jobless claims and housing starts numbers. However, there was more bad news on the manufacturing front after the Philadelphia Fed Survey showed a surprise drop on -7.8 in June. Economists were looking for +9. Still, after the market’s sell-off yesterday, stocks found a floor in early trading and market averages were positive midday. Investors sold into the strength, however, and heading into the final thirty minutes, market action is decidedly mixed. While the Dow Jones Industrial Average has added 38 points, the tech-heavy NASDAQ gave back its gains and is down 15.5 points. CBOE Volatility Index (.VIX) jumped 1.91 points to 23.23 and is probably being affected by the Quadruple Witch options expiration. Volume is picking up as well, with 11.7 million calls and 10.5 million puts traded so far.

Bullish Flow

Medivation (NASDAQ:MDVN) adds 55 cents to $21.20 and one stategist sells 19,800 Jun 7 calls at $14.20 to buy 19,800 July 13 calls at $8.425. Looks like a roll of a bullish position out one month, up 6 strikes, and is part of an ongoing strategy that dates back many months. Most recent was a Mar – Jun 7 call spread at 13 cents, 19800X in mid-March. Shares are up 31.8 percent since that time.

Cisco (NASDAQ:CSCO) adds 20 cents to $15.04 and one strategist initiates a Jan13 10 - 20 bullish risk-reversal at 23 cents, 10000X. With shares sitting almost exactly midway between the to strikes, the position, which looks opening, is perhaps a bet that shares will see brighter days in 2012 than during the first half of 2011. CSCO is down 26 percent year-to-date.

Bearish Flow

Ford (NYSE:F) is down 12 cents to $13.03 in morning trading and the Jun 13 put on the automaker is almost at-the-money after a 12.7 percent month-to-date skid in shares. The contract expires at the end of the week and 25,885 have traded so far today, at a VWAP of 8.9 cents. It is today’s most actively traded equity options contract. Some of the activity appears to be rolling to Jul 13, as the top trades so far in Ford today are a Jun – Jul 13 put spread, apparently bought at 36 cents, 2200X on ISE. This probably closes June and opens in July, on concerns that Ford shares might lose some more ground in the weeks ahead. Total volume is 22K calls and 46K puts so far in Ford.

Implied volatility Mover

PowerShares QQQ (NASDAQ:QQQ) adds 2 cents to $54.31 in quiet market action early-Thursday and one strategist sells the Jul 52. -55 put spread at $1.06 to buy the Sep 49 – 52 put spread at 72 cents, collecting 34 cents on the four-way, 10000X. The action probably rolls a bearish position or hedge out from Jul to Sep and down a few strikes. Qs are down 7 percent month-to-date and QQQ implied volatility, as measured by the QQV index, is up to 19.6 from 14.2 during that time.