Monday Options Recap

Includes: GM, GS, KODK, PFE, SWKS, WMT
by: Frederic Ruffy


Stocks are broadly higher on a relatively slow news day Monday. With no earnings of broad market significance and no economic data to guide the action, stock market averages drifted higher at the open and trading has been relatively uneventful from that point forward. The euro is steady against the dollar after European finance ministers set a two-week deadline for Greece to implement stricter austerity measures to get more loans. Pfizer (NYSE:PFE) is helping the Dow Jones Industrial Average after the FDA approved a pain drug and Wal-mart (NYSE:WMT) is also among the Dow’s winners after the retailer won a discrimination lawsuit. Crude oil has battled back from early weakness and is up 23 cents to $96.23. Gold gained $3.2 to $1542.30 an ounce. Meanwhile, the Dow Jones Industrial Average is up 75 points and the tech-heavy NASDAQ has added 15. CBOE Volatility Index (.VIX) gave up 1.52 to 20.33. Trading in the options market is light, with 6.7 million calls and 5.2 million puts traded so far.

Bullish Flow

GM adds 47 cents to $29.47 and an investor sold 15,000 Jul 31 calls on the automaker at 31 cents each. The trade was tied to 280K shares at $29.50. August 30 calls are seeing interest as well. 10,660 traded, mostly smaller lots traded at the asking price. Overall sentiment seems to be leaning on the bullish side, as 40,000 calls and 9,560 puts now traded in GM. Shares are up 4.5 percent from the 52-week low of $28.17 set Thursday, but down 7.5 percent month-to-date.

The top equity options trade so far today is a 20,000-contract block of Jul 5 calls on Eastman Kodak (EK). It was bought at 8 cents per contract. The same investor also sold 10,000 July 3.5 calls at 40 cents each. They collected 24 cents for the 1X2 backspread and might be rolling a position up in strikes. The spread has traded more than once today and volume in the Jul 5s is now 26,500. Open interest is 23,105.

Bearish Flow

Skyworks Solutions (NASDAQ:SWKS) is down $1.38 to $21.79 and implied volatility up after Deutsche Bank cut the stock to Hold from Buy. 28,000 puts and 8,200 calls traded on the Woburn, MA chipmaker. Much of the volume is in August in-the-money and out-of-the-money puts, with some players likely exiting positions after a four-month 40.7 percent slide in the share price. For example, August 25 puts, which are 12.8 percent ITM, are the most actives. 4,600 traded (71 percent Bid) against 3,976 in open interest. Still, some investors are likely taking new positions in reaction to the downgrade and implied volatility in SWKS is up 10 percent to 54.

Implied volatility Mover

Goldman Sachs (NYSE:GS) implied volatility is moving a bit higher today. Shares are down $2 to $135.23 and seeing relative weakness Monday morning after Citi lowered their price target on shares of the investment bank to $180 from $200. Options volume is 2,800 calls 3,830 puts. July 130 puts are the most actives. 740 traded. Weekly 125 puts, 130 puts and 140 calls are seeing interest as well. Players are jockeying for position in anticipation of increased volatility in GS shares and IV is up 10 percent to 28.5.