Wednesday Options Recap

Includes: BBRY, CBOE
by: Frederic Ruffy


Global equity markets rallied around hopes for monetary easing Wednesday. Japan's Nikkei rose 1.8 percent and Hong Kong's Hang Seng was up 1.4 percent before exchanges opened in Europe. Stocks rallied there too after the ECB concluded its rate policy meeting. While the Central Bank left rates unchanged, ECB President Mario Draghi noted that some officials were leaning towards looser policy. The Bank of England meets tomorrow and some expect to hear talk of asset purchases by UK monetary officials seeking to avoid a deeper recession. Meanwhile, hopes for another round of Quantitative Easing are building in the US ahead of Fed Bernanke's testimony to Congress tomorrow. The only economic data today showed first quarter productivity down .9 percent, which was in-line with Street expectations. The market showed little reaction to the news. Instead, it's all about the Central Banks today and short-covering helped as well. The Dow Jones Industrial Average is up 223 points and 15 points off session highs. The tech-heavy NASDAQ gained 56 points. CBOE Volatility Index (.VIX) is off 1.93 points to 22.75 points and now 5 points below Monday morning highs. Trading in the options market is active. 7.8 million calls and 7.7 million puts so far.

Big Bet on a RIM Rebound

RIMM adds 20 cents to $10.14 and a Jan 8 - 14 risk-reversal trades on the Blackberry-maker at 14 cents, 24000X on PHLX. A source on the exchange floor confirms that the massive block of puts was sold to buy calls. The position looks opening (volume exceeds open interest) and not tied to stock. The bullish combo is taking advantage of a bit of skew, as implied vols in the Jan 8 puts are near 67 compared to 60 for the Jan $14 calls. RIMM hit a 52-week low of $9.57 on Monday and has lost three-quarters of its value over the past twelve months. Bloomberg had an article last week suggesting that some investors now believe that a sale of the company is now the best option. Earnings are due on June 28th.

Sizing Up CBOE

CBOE Holdings adds 63 cents to $26.53 and is on a three-day 5.7 percent rally so far this week. Options action is picking up in the name, with 4,580 calls and 165 puts traded on the owner of the Chicago Board Options Exchange. The flow has been in smaller lots and includes a multi-exchange sweep of 245 Dec 27 calls at the $1.45 asking price. 700 now traded. Jul 27, Jul 26 and Sep 26 calls are the next most actives and 30-day ATM implied volatility is easing 8.5 percent to 21, as shares try to rebound from the 15.1 percent slide suffered from late-March through last-Friday - when the exchange released monthly volume statistics for May. Earnings were last reported on 5/1 and today's increased call activity comes ahead of a presentation at a Sandler O'Neill Exchange and Broker Conference this Friday. CBOE is one of many exchanges listing puts and calls today.

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