Wednesday Options Recap

by: Frederic Ruffy
Stock market averages are giving some back Wednesday. After three-days of gains, market action was mixed early after data showed orders for durable goods down .1 percent in August. Economists were looking for an increase of .1 percent. Meanwhile, stock market averages were mostly lower across the Eurozone after the big gains tallied the day before. Crude oil is also giving back some of Tuesday’s big move and was recently down $3.07 to $81.38 per barrel on bearish weekly inventory data. The tone of trading on Wall Street has a wait-and-see feel, as investors await new developments related to the European Debt Crisis. Economic uncertainty persists. However, the decline thus far has been orderly and the Dow Jones Industrial Average has given up 40 points. The tech-heavy NASDAQ lost 18. CBOE Volatility Index (.VIX) gained 1.29 to 39 amid low volume in the options market. 4.9 million calls and 6.3 million puts traded so far.

Bullish Flow
Barrick Gold (NYSE:ABX) loses $1.49 to $46.15 and is now down 17.5 percent from the 52-week high of $55.95 set intraday on Sep 8. Like other names in the sector, shares have been falling under the weight of lower gold prices. The yellow metal is down $36.6 to $1614 an ounce today and now $300 below the levels of more than $1900 seen earlier this month. Order flow in ABX is interesting today, as 36,000 calls and 9,275 puts traded on the miner so far. Top trades include an 8568 contract block of Jan 60 calls at 90 cents. The market is now 78 to 80 cents and 12,654 have changed hands. It might be closing activity, as the contract is 30 percent OTM and has 34,374 in open interest, which is the second largest position in ABX behind Jan 35 calls. Jan13 $70 calls and Jan13 $45 puts are the next most actives. Oct 42, 48 and 50 calls on Barrick are seeing some interest. April 48, Jan 40 and Jan13 47 calls are actively traded as well. Implied volatility is up 3 percent to 46, as players appear to be adjusting and closing position in the options on the stock after the volatile move lower over the past few weeks.

Bearish Flow
Sandisk (SNDK) is off 51 cents to $42.72 and an Oct 37 – 40 put spread is bought on the stock at 70 cents, 6500X. Open interest is sufficient to cover, but this might be a new position as today represents the most one-day volume for both contracts. More than 7,000 traded in both. A shareholder might have initiated the trade to protect recent gains in the stock. Shares have rallied 32.1 percent off a 52-week low of $32.34 set intraday on 8/23. Earnings expected around 10/20, possibly before the expiration.

First Solar (NASDAQ:FSLR) is under pressure today after Cantor reiterated a Sell rating and cut EPS numbers on the stock. Shares are down $6.57 to $65.70 and recent options trades in First Solar include an Oct 50 - 60 put spread, bought at $2.37, 4600X. It's traded more than once today, as volume in both contracts now exceeds 10.5K. Looks opening. Dec 55 - 70 put spread was apparently bought at $680, 1000X as well. 40K puts and 14K calls traded and bearish action in FLSR has implied volatility up 15 percent to 88.

Implied Volatility Mover
Interoil (NYSE:IOC) is under pressure for a second day and is down $6.29 to $39.53. IOC is on a two-day 28 percent losing skid and falling to new 52-week lows today on reports the Papau New Guinea government wants the company to revise plans for an LNG project there (Reuters). Options on the Australian oil and gas refiner are actively traded as well. 8,630 puts and 6,650 calls traded in IOC so far today. Jan 22.5 puts, which are now 43.1 percent OTM, are the most actives. 942 traded (79 percent Ask) against 85 in open interest. Oct 30 puts, Oct 35 puts, Oct 40 calls, Jan 70 calls are seeing interest. Meanwhile, implied volatility in IOC is up another 30 percent to new highs around 130, up about 50 percent since Monday.
Unusual Volume Movers

Bearish activity detected in Mattel (NASDAQ:MAT), with 11824 puts trading, or 15x the recent avg daily put volume in the name.

Bearish activity detected in D R Horton (NYSE:DHI), with 6522 puts trading, or 8x the recent avg daily put volume in the name.

Bearish activity detected in Barnes and Noble (NYSE:BKS), with 2163 puts trading, or 4x the recent avg daily put volume in the name.

Relatively high options volume in First Solar (FSLR), Arch Coal (NYSE:ACI), and Seagate (NASDAQ:STX) today.