Wednesday Options Recap

by: Frederic Ruffy


Stock market averages are holding higher late-Wednesday. Solid gains across the Eurozone, including a 2.4 percent rally in Germany’s DAX, helped set a positive tone for morning trading on Wall Street. The domestic news wasn’t stellar after ADP reported that the US economy added 170K jobs in January, which was 30,000 shy of economist estimates. The ISM Index for January was up to 54.1 in January, which was up from 53.1 the month before, but .4 less-than-expected. The final stat of the day showed Factory Orders up 1.5 percent in December and 1.1 percent more than expected. The domestic data didn’t matter too much today and investors seemed to take the lead from the action on the other side of the Atlantic Wednesday. The Dow Jones Industrial Average staged a triple digit gain in the first few minutes and has been rangebound since that time. The Dow is now up 128 points and 14 points off session highs. The tech-heavy NASDAQ has added 38 points. CBOE Volatility Index (.VIX) slipped 1.09 points to 18.35 and is probing this year’s multi-month closing low of 18.24. Trading in the options market is active today, with 7.1 million calls and 5.7 million puts traded so far.

Bullish Flow

Dendreon (NASDAQ:DNDN) adds $1 to $14.58 and recent trades on the biotech include a May 15 - 18 call spread, bought for $1, 1250X. Looks like a bullish play on the stock. Overall, trading is active in the name today. Share volume is approaching 13 million, compared to typical volume of less than 9 million. 16,000 calls and 3,085 puts traded, while implied volatility in DNDN options has moved up 6 percent to 84 after the company announced that it has hired a new President and CEO today. Earnings come into play in a few weeks.

Big call buyer is back in BofA (NYSE:BAC) Wednesday. Shares have added 25 cents to $7.38 and a 62500-contract block of Apr 8 calls is bought on the bank for 37 cents. The trade is tied to 2.3 million shares at $7.40 and likely adds to positions opened yesterday, when 62,500 were bought for 28 cents per contract (see 1/31 color).

Bearish Flow

Relative weakness and high volume in ATP Oil and Gas (ATPG) today. Shares of the Houston, TX driller are down 10 percent to $6.33 on volume of 3 million shares, which is more than 6X the expected. Options on the stock are actively traded as well. 7,670 puts and 4,880 calls so far. Feb 6 puts, which are 6.1 percent OTM with two-and-a-half weeks of life remaining, are the most actives. 1,890 traded. Feb, Mar and Jun $5 puts are also seeing interest and implied volatility is rallying 47 percent — once again elevated at 139.5. Players appear to be bracing for further losses in shares, which are down almost 70 percent since February of last year. No company news to explain the high volume in ATPG today.

Implied volatility Mover

Manitowoc (NYSE:MTW) adds $1.60 to $15.04 on volume of 4 million shares after the farm and construction company reported better-than-expected earnings and revenues after the close of trading yesterday. Typical share volume through the first hour is about 750K. Options on the stock are seeing high volume as well. 11,000 calls and 1,570 puts traded in MTW so far. Feb 14 calls are the most actives. 3,540 traded. Another 3,255 Feb 15 calls changed hands. Implied volatility is down 22 percent to 50.5 and its lowest levels so far this year (but still well above the 52-week lows of 38 seen on 7/1), as some investors are likely liquidating positions opened before earnings were reported Tuesday afternoon.

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