Monday Options Recap

Includes: EA, FXI, KKD, SINA
by: Frederic Ruffy


Stocks are rallying around early holiday shopping results and amid hopes for Europe. Stock market averages moved broadly higher across the Eurozone, including a 5.5 percent surge in France’s CAC 40 Index, ahead of a meeting of EU Finance Ministers Tuesday. Investors are hopeful that officials will soon reach some agreement on plans to stem the debt crisis, including leveraging a key bailout fund. Meanwhile, ShopperTrack reported record Black Friday sales, as more than $11 billion was spent, or 6.6 percent more than last year. The only economic stat of the day showed New Home Sales at an annual rate of 307K in October, which was up slightly from September, but below expectations of 312K. However, with Europe’s equity markets surging, the data had little market impact and the Dow Jones Industrial Average is up 226 points in the final hour. The tech-heavy NASDAQ gained 70. CBOE Volatility Index (.VIX) is down 1.70 to 32.77 and 3.30 points off session lows. Volumes are not impressive today, as 7.4 million calls and 5 million puts traded across the exchanges.

Bullish Flow

iShares FTSE China Fund (NYSEARCA:FXI) adds $1.19 to $34.52 and a Jan 36 – 39 call spread is bought on the ETF for 94 cents, 14000X. It might be a position adjustment or closing trade, as open interest is sufficient to cover in both contracts. If opening, the spread has an upside breakeven at $36.94 at the expiration, which represents an additional 7 percent gain over the next 53 days.

Electronic Arts (ERTS) adds $1.37 to $22.20 and 15,877 Jan13 $30 calls are bought on the video game-maker for $1.71 per contract. It's possibly closing. The contract is 35.1 percent OTM and 16,308 contracts traded against 21,760 in open interest. Or, it might be an opening play, as shares have recaptured a 200-day MA today and have been grinding higher over the past few months -- up 26 percent since 8/10. A 52-week high was recorded earlier this month when the stock closed at $25.20 on 11/4.

Bearish Flow

It’s been a volatile day for SINA shareholders, as the stock fell to a 52-week low of $56.05 on talk Muddy Waters was set to unleash a negative research report on the Chinese Internet company. Shares are now down $3.15 to $60 and off session lows after Muddy Waters denied the speculation (per Benzinga). Still, shares are down and implied volatility in SINA options up 17 percent to 97, on 3X the daily options volume for the name. 19,000 calls and 46,000 puts traded in SINA so far. Dec 40 puts are the most actives and traded predominantly (75 percent) on the bid. 5,920 changed hands. Weekly (12/2) 50, 55 and 57.5 puts are the next most actives in SINA today.

Implied volatility Mover

Henry Schwartz notes today that: Krispy Kreme (KKD) is seeing Notably bullish option flow in front of Wednesday’s post-close earnings release. 3700 calls on the tape by 11am (vs 3 puts) and the focus is on the Dec 7.5 strike, where buyers have paid up to 30 cents to open new positions struck about 12% above current spot. Front term ATMIV of 90% is nearly 20 points above Jan ATMIV, and suggests an earnings day standard deviation of nearly 17%, dramatically higher than the non-earnings daily deviation of approx 3.65%.

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