Friday Options Recap

by: Frederic Ruffy


Stocks struggled following a week of solid gains and a mixed jobs report Friday. The jobs data showed the US economy adding 140K jobs last month, which was a bit less than expected. However, the rate of unemployed unexpectedly fell .4 percent to 8.6 percent. Economists were expecting it to hold steady around 9 percent. Yet, hourly earnings decline .1 percent and .4 percent worse-than-expected. Beyond that, it’s been a slow news day and trading has been choppy, without any real conviction. The Dow Jones Industrial Average is up 18 points and has rallied more than 800 points on the week. The tech-heavy NASDAQ added another 4 points. With thirty minutes left to trade, CBOE Volatility Index (.VIX) is flat at 27.1. Trading in the options is much more active today than early in the week. 7.6 million calls and 6.7 million puts traded across the exchanges.

Bullish Flow

Mittal Steel (NYSE:MT) gains 12 cents to $19.12 and a 11,000-contract block of Dec 21 calls trades on the steelmaker for 36 cents when the market was 33 to 36 cents. Several sweeps of Dec 21 calls also traded on the stock across multiple exchange today. Data is hinting at an opening buyer. 23,200 now traded at a VWAP of 33.2 cents against 1,564 in open interest. The market is now 38 to 40 cents and implied vols in options on MT are up 4.5 percent to 64.5. Bullish trading comes as the stock tries to recover some of this year’s losses. MT is down almost 50 percent year-to-date, but up more than 25 percent since last-Wednesday.

Bearish Flow

Bearish trading continues in a handful of sector ETFs Friday. Yesterday, a buyer was opening substantial positions in March puts on the XLI, XOP, XME, XLB, and XLF funds. Today, the focus has shifted to December contracts and large blocks of puts have traded on the ISE, where sentiment data is consistent with opening buyers. The flow is noteworthy, as all of these puts have relatively low deltas because the contracts are OTM and expiring in two weeks. The list includes: 11,878 Dec 48 puts on SPDR Retail Trust (NYSEARCA:XRT) for 30 cents per contract, 21,800 Dec 44 puts on the SPDR Oil and Production ETF (NYSEARCA:XOP) for 16 cents per contract, 23,969 Dec 43 puts on the SPDR Metals and Mining ETF (NYSEARCA:XME) for 12 cents, 46,479 Dec 29 puts on the SPDR Industrials Fund (NYSEARCA:XLI) for 7 cents, and 49,824 Dec 29 puts for 6 cents on the SPDR Basic Materials Fund (NYSEARCA:XLB).

Implied Volatility Mover

H&R Block (NYSE:HRB) opened at $15.48 and hit a high of $15.79 this morning after earnings were reported yesterday afternoon, but the stock has since come under fire and is down $1.40 to $14.66. Early options order flow on the tax preparation company includes a multi-exchange sweep of 2,339 Dec 15 calls for 45 cents per contract when the market was 40 to 45 cents. Data indicate an opening buyer. 7,170 now traded against 1,004 in open interest. January 15 calls, which are also 2.3 percent out-of-the-money, have traded 1,000 contracts. Total options volume in HRB is 9,450 calls and 2,460 puts and implied volatility in the options on the stock is up 7 percent to 41.5. The volatility is possibly due to the fact that the company reported a wider-than-expected second quarter loss of 38 cents per share. Looking forward, H&R Block’s Investor Conference is scheduled for Dec 8.

Unusual Volume Movers

Bullish flow detected in Idenix Pharmaceuticals (NASDAQ:IDIX), with 2161 calls trading, or 3x the recent avg daily call volume in the name.

Bullish flow detected in RPC Inc (NYSE:RES), with 2973 calls trading, or 5x the recent avg daily call volume in the name.

Bullish flow detected in JetBlue Airways (NASDAQ:JBLU), with 3832 calls trading, or 3x the recent avg daily call volume in the name.

Meanwhile, increasing options volume is being seen in Research In Motion (RIMM), Morgan Stanley (NYSE:MS), and JP Morgan (NYSE:JPM).