Friday Options Recap

by: Frederic Ruffy

Stocks are trading decidedly mixed, with not much new information to guide the market action on expiration Friday. The List of Leading Economic Indicators, which rose .9 percent in October and .3 percent more than expected, is the only economic stat on the calendar today. Meanwhile, the euro has added .4 percent on the buck and equity markets finished mixed in a quiet day of market action across the Eurozone. In the commodities market, gold gained $5 to $1722 an ounce, but crude oil gave back $1.30 to $97.60 per barrel. Overall, there isn’t much news to report heading into the weekend. The Dow Jones Industrial Average has managed a 50-point gain, but the tech-heavy NASDAQ is down 10. CBOE Volatility Index (.VIX) is down 2.12 points to 32.39. Trading is slowing heading into a holiday-abbreviated week of trading next week, but volume totals are respectable due to the expiration. 7.8 million calls and 7.6 million puts traded so far.

Bullish Flow

CBOE Volatility Index (.VIX) slips .96 to 33.55 Friday morning, as the options expiration hasn’t stirred up much market volatility so far today. A noteworthy trade in the volatility index today is a four-way, in which the Dec 35 – 55 call spread was sold on the index at $2.80 and the Feb 35 – 55 call spread bought for $3.45. 65 cents was paid for the package, 108000X, and probably rolls a position out two months. Some of the Dec 35 – 55 call spread was apparently opened on Sep 7 when 45000 were bought for $2.10 and 45000 for $2.075. The spot index is down 1.5 percent since that time, but the trade is a winner due to the fact that VIX is based on expected or forward values of the index — which have been moving higher since the original trade was initiated. Today’s spread trader seems to expect the trend to continue in the months ahead.

Bearish Flow

43,000 puts and 9,650 calls traded on Morgan Stanley (NYSE:MS) through midday. Shares are down 7 cents to $14.20 and the top trade is a 10000-contract block of Jan13 $13 puts for $3.55 on ISE. Data indicate an opening customer buyer. Separately, a 5200-lot of Jan13 $20 puts traded at $7.80 on ISE and is also an opening position, according to ISEE data, and traded b/d-to-b/d. Nov 14 puts, which are 20 cents OTM heading into the expiration, are also actively traded. A 3,346-contract block traded at 15 cents this morning. 8,400 now traded and the market is 9 to 11 cents. Meanwhile, implied volatility in MS options is easing 7.5 percent to 71, as shares attempt to stabilize from a two-day 11.3 percent skid suffered Wednesday and Thursday.

Implied Volatility Mover (NYSE:CRM) shares are down $12.20 to $113.89 and trading is active in the front-month options on the stock after the company reported better-than-expected third quarter results and offered in-line guidance for the fourth. 39,000 contracts traded in CRM during the first 20 minutes of trading. 25,000, or 64.1% of the activity, are expiring November contracts. In order of volume, Nov 110 puts, 120 puts, 115 puts, 125 puts, 120 calls, 100 puts, 115 calls, and 125 calls are the most actives. Last day premium selling and the post-earnings vol crush has implied volatility in CRM options down 28.5 percent to 55.

Unusual Volume Movers

Bullish flow detected in Dunkin Brands Group (NASDAQ:DNKN), with 3602 calls trading, or 7x the recent average daily call volume in the name.

Bearish activity detected in Clearwire (CLWR), with 8425 puts trading, or 4x the recent average daily put volume in the name.

Bearish activity detected in Achillion Pharmaceuticals (NASDAQ:ACHN), with 2082 puts trading, or 63x the recent average daily put volume in the name.

Unusual high options volume is also being seen in Jefferies (JEF), Microsoft (NASDAQ:MSFT), and H-P (NYSE:HPQ).