Friday Options Recap

by: Frederic Ruffy


Stock market averages fell on jobs data early and remained in the red late-Friday. The Labor Department reports that the U.S. economy added 115,000 jobs in April, which was well below expectations of 162,000. Plunging oil prices also are weighing on the energy-related names after crude shed $4 to $98.54 per barrel. Meanwhile, flight-to-safety is giving gold and Treasurys a modest lift into the weekend and ahead of French and Greek elections Sunday. With an hour left to trade, the Dow Jones Industrial Average was down 153 points and 32 points off session lows. The Nasdaq gave up 60 points. CBOE Volatility Index (.VIX) jumped 1.44 to 19. Fear seems to be a factor. Trading in the options market is at the highest levels of the week. 7.4 million calls and 7.6 million puts traded across the exchanges thus far.

Bullish Flow

Diamond Foods (DMDN) sees an afternoon spike to $22.2 and is now up 93 cents to $21.64 on increasing volume of 644K shares. Options action is picking up as well. 5,440 calls and 1,280 puts traded on DMND so far. Jun 29 calls, which are 34% OTM and expiring in 42 days, are the most actives, 1,260 traded. The soon-to-expire weekly 22 calls are the second most actives. 926 contracts changed hands. The flow has been in smaller lots and seems to include some upside all buying, 30-day ATM Vols are up 12% to 78. Shares of the San Francisco food company plummeted in February on concerns about payments made to walnut growers. DMDN has lost three quarters of its value since mid-September.

Bearish Flow

Research In Motion's (RIMM) woes continue. The stock is off 13 cents to $11.91 and falling to eight-year lows today in active trading of 8 million shares. 73,000 puts and 17,000 calls traded on the Blackberry-maker, including a Jun 13 – Jul 12 put spread at 16 cents, 20720X on CBOE. The spread was probably bought and rolls a position out one month, down one strike. If so, it might exit a position in June 13 puts (at $1.65 today) bought for 95 cents per contract on 4/20. Shares are down 11% since that time and today’s spread trader appears to be bracing for additional losses through mid-July. RIM was up 7.1% on 3/30 after earnings were last reported, but has given up the gain (and an additional 13%) since that time.

Cognizant Tech (NASDAQ:CTSH) is off $1.35 to $69.74 and recent trades on the stock include a three-way, with the investor apparently selling 1,000 May 75 calls at 70 cents to buy a May 60 – 67.5 (2X1) put ratio spread for $1.20, 1,000X. Bearish spread trading is possibly a short-term hedge ahead of the software-maker's earnings report, due Monday morning.

Implied Volatility Mover

Frontier Communications (NYSE:FTR) sees active trading today, with some investors apparently bracing for some post-earnings volatility in the stock. The Stamford, CT telecomm is due to release results Monday morning. In early options action, one player bought 5,000 May 4 calls on the stock for a dime on ISE. It was an opening customer, according to ISEE, and was probably tied to 148K shares at $3.88. More than 10,900 now traded. Later, 10,000 May 4 puts were apparently bought on FTR for 25 cents on PHLX and maybe tied to 610K shares for $3.89. A third noteworthy trade is 10,000 June 4 calls for 14 cents when the market was 10 to 15 cents and looks like an opening buyer tied to 1 million shares at $3.87. The stock is down 17 cents to $3.87 in active trading of 13 million shares and 30-day ATM vols are up 29% to 41 amid the increased order flow.

Unusual Volume Movers

Bullish flow detected in Owens Corning (NYSE:OC), with 5,086 calls trading, or 4x the recent average daily call volume in the name.

Bullish flow detected in Hologic (NASDAQ:HOLX), with 4,456 calls trading, or 6x the recent average daily call volume in the name.

Bullish flow detected in IMAX (NYSE:IMAX), with 6,265 calls trading, or 3x the recent average daily call volume in the name.

Unusually high options volume is being seen in US Oil Fund (NYSEARCA:USO), Green Mountain Coffee Roasters (NASDAQ:GMCR), and LinkedIn (LNKD).