Thursday Options Recap

by: Frederic Ruffy


Stock market averages fell in morning trading, but action has turned mixed heading into the final hour Thursday. Losses across the eurozone’s equity markets and ongoing weakness in the euro set the table for morning weakness on Wall Street. The European currency fell to two-year lows of less than 1.22 against the buck. Meanwhile, a 2.6 percent loss in Spain’s IBEX helped pace a decline in European equity markets. Asia’s markets were broadly lower as well, with Japan’s Nikkei losing 1.5 percent and Hong Kong’s Hang Seng shedding 2 percent. The concerns about a worldwide economic slowdown and market volatility quickly spilled onto U.S. shores.

The Dow faltered early, despite 4+ percent rallies in Procter & Gamble (NYSE:PG) and Merck (NYSE:MRK). While PG helped the Dow on news that activist investor Bill Ackman is interested in buying some of the company, MRK rallied on an analyst upgrade and positive drug trial results. On the economic front, the latest jobless claims data, which showed a surprise decline of 15,000 last week, did little to bolster sentiment through midday. Yet, the selling pressure never gathered any significant momentum, and instead, trading had turned mixed heading into the closing bell. The Dow is now up 5 points, but the NASDAQ lost 17. CBOE Volatility Index (.VIX) hit a morning high of 19.51, but was recently up just .12 to 18.07. Options volumes are running at their best levels so far this week. 6.4 million calls and 6.7 million puts traded so far.

Bullish Flow

Wells Fargo (NYSE:WFC) is off 27 cents to $33 ahead of tomorrow morning's earnings release, and implied volatility in the options on the bank is moving up amid a flurry of call activity today. 78,000 calls and 39,000 puts so far, a ratio of two-to-one. July 34 calls, which are $1 out-of-the-money and expiring one week after the company reports earnings, are the most actives. The flow includes a 12,460-lot for 30 cents on ISE and is an opening buyer, according to ISEE data. More than 44,000 now traded. At-the-money July and weekly $33 calls are the next most actives, and 30-day ATM vols are moving up 12 percent to 29. Interestingly, however, the weekly 33 straddle is currently trading at 4 percent of the spot price, which is less than the average daily post-earnings move over the past four quarters (4.6 percent). Shares slipped 3.5 percent to $32.84 on 4/13 when profits were last reported.

Bearish Flow

Viacom (NASDAQ:VIAB) loses 70 cents to $46.02, and early trades on the media company include a multi-exchange sweep of 4,000 Sep 43 puts for $1.30 per contract. A customer bought-to-open, according to ISEE. 5,140 puts and 82 calls now traded on VIAB. Bearish trading comes the day after headlines were crossing about the dispute between VIAB and DirectTV. Viacom has dropped MTV, Nickelodeon and 15 other channels from DirectTV due to the dispute. Recent reports suggest the two sides are still “pretty far apart” on negotiations.

Implied volatility Mover

Tyson Foods (NYSE:TSN) loses 61 cents to $16.45 and more than 2,000 Aug 17 puts traded on the stock. Looks like opening buying, as 99 percent traded at the ask and open interest is 198 contracts. Implied volatility is up 16 percent to 31, as shares continue a recent sell-off triggered by popping corn prices. The stock has suffered an 8-day, 12.6 percent losing skid and is falling to multi-month lows on concerns higher corn costs will squeeze the poultry producer's profit margins.

Unusual Volume Movers

Bearish activity detected in Huntington Bancshares Inc. (NASDAQ:HBAN), with 19524 puts trading, or 14x the recent average daily put volume in the name. Shares near $6.34 (-0.12), with ATMIV lifting by 1.69 point and 68% of today's put premium trading offer side.

Bullish flow detected in Headwaters Inc. (NYSE:HW), with 4383 calls trading, or 15x the recent average daily call volume in the name. Shares near $5.8 (0.1), with ATMIV lifting by 8.54 point and 98% of today's call premium trading offer side.

Bearish activity detected in MAP Pharmaceuticals Inc. (NASDAQ:MAPP), with 4073 puts trading, or 27x the recent average daily put volume in the name. Shares near $14.055 (-0.595), with ATMIV lifting by 20.16 point and 53% of todays put premium trading offer side.

High options volume is being seen in Intel (NASDAQ:INTC), Pfizer (NYSE:PFE), and Supervalu (NYSE:SVU).