Friday Options Recap

by: Frederic Ruffy


Stock market averages are mixed in slow trading. The table was set for a steady open on Wall Street Friday after European equity markets closed higher to snap a series of consecutive losing streaks. France’s CAC 40 Index paced the advance with a gain of 1.2%. However, trading remains cautious after the poor auction of German bonds mid-week raised concerns the debt crisis is spreading to Europe’s core. The euro has lost .8% and now trades at 1.3242 on the buck. Worries about the Super Failure in Washington related to deficit talks is also weighing on investor sentiment this week. Beyond that, there has not been a lot to guide the market, as the economic calendar is empty until Monday’s report on new home sales and trading desks have skeleton crews for the abbreviated trading session Friday. Market action is decidedly mixed. The Dow Jones Industrial Average is up 22 points, but the tech-heavy Nasdaq lost 8 points. CBOE Volatility Index (.VIX) edged up .10 to 34.08. Overall options volume is 2.7 million calls and 2.5 million puts.

Bullish Flow

In addition to the flurry of activity in the individual banks Wednesday, as well as the heavy trading in the SPDR Financials (NYSEARCA:XLF) lately, the PHLX Bank Sector Index (.BKX) is now seeing higher volume. BKX is up .36 to 35.02, but off 1.3% from session highs of 35.52. Meanwhile. options volume in the index is 12,000 calls and zero puts. The bulk of the volume is due to one spread trade, in which 6,000 Jan 41 calls were apparently bought on the bank index for 65 cents while 6,000 Jan 42 calls sold for 45 cents. The Jan 41 - 42 call spread, for a net debit of 20 cents, appears to be a new position targeting a move to 42 or more in the index through Jan 2012, which represents a 20% rally over the next eight weeks. After rallying nearly 30% off the 52-week lows seen intra-day on Oct 4, the rally in the bank index stalled on October 27 and BKX is down 17.3% since that time. Through Wednesday, the index had retraced 87.1% of the 8.32-point gain recorded from Oct 3 to Oct 27. The recent options flow in some of the banks and the bank index seems to reflect some expectations for another run higher in the sector in the weeks ahead.

Bearish Flow

Titanium Metals (TIE) adds a nickel to $14.15 and early trades on the stock include a Dec 13 - 14 - 15 put fly for 30 cents, 250X on ISE. Data indicate the spread was bought-to-open. 1,000 now traded and seems to be targeting a move to $14 (~1.1%) through the December expiration (21 days).

Implied Volatility Mover

Amarin (NASDAQ:AMRN) with relative strength and lower levels of implied volatility Friday after the FDA accepted the biotech's New Drug Application for AMR101, a treatment for high triglyceride levels. Shares are up 37 cents to $7.04 and Dec 6 puts are the most actively traded options on the stock. 1,750 traded (94 percent Bid). Dec 7 puts and Dec 8 calls are also seeing volume and trading predominantly on the bid. 2,280 puts and 1,115 calls traded on the stock and implied volatility is down 11%, but still elevated at 107.

Unusual Volume Movers

Bullish flow detected in Corinthian Colleges (NASDAQ:COCO), with 4,885 calls trading, or 4x the recent average daily call volume in the name.

Bearish activity detected in Gerdau (NYSE:GGB), with 3,000 puts trading, or 3x the recent average daily put volume in the name.

Bearish activity detected in Nokia (NYSE:NOK), with 9,013 puts trading, or 2x the recent average daily put volume in the name.

Meanwhile, unusually high options volume is being seen in MGIC (NYSE:MTG), Symantec (NASDAQ:SYMC) and Blackstone (NYSE:BX).