Wednesday, September 19, 2012

Thursday Options Recap


Stocks are holding modest gains in slow, pre-holiday market action Thursday. With no real stock news to guide the action, economic data was in focus early. A report on November durable goods showed an increase of just .2 percent; which is better than the .6 percent decline in October, but below the .5 percent average economist estimate.

However, a separate report showed weekly jobless claims falling to 452,000 in the period ended December 19, down from 480,000 two weeks ago and better than the 470,000 economists had predicted.

In the end, the data didn’t seem to matter much and the slow grind higher continues for the S&P 500. The index has traded in a narrow 6-point range and is up 4.6 heading into the final hour (markets close at 1:00 eastern time). The CBOE Volatility Index (.VIX) slumped .25 to 19.46. Trading in the options market is light, with approximately 1.6 million puts and 4.4 million calls traded so far (a ratio of .37, compared to a 22-day average of .70.)

Bullish Flow

Apple Computer (AAPL) is up $4 to $206.10 and calls are seeing early action after MacRumors reports that chatter has exploded in recent days, which hints at a possible January release of a new Apple Tablet device. 42,000 calls and 16,000 puts traded in the first 20 minutes on Apple Thursday, including 12,070 January 210 calls (28 percent mid-market/53 percent ask-side.)

Heavy volume of more than 1 million Calls in Altria (MO) is related to stock trading ex-dividend. Options market closes at 1:00 eastern time today. So, the ex-div activity is a bit earlier than usual. Kraft Foods (KFT) and Campbell’s (CPB) are dividend plays as well. The action is also distorting the total put-to-call ratio (above).

Bearish Flow

Barrick Gold (ABX) has overcome early weakness and is up 21 cents to $40.44 after gold gained $11 to $1105 an ounce. In the options market, some traders are showing interest in the Jan 36 - 41 risk-reversal. Looks like they’re collecting about $1.03 to sell calls, buy puts, more than 7000X today. Separately, one or more strategists is buying the Jan 40 straddle. For example, they bought 1000 at $3.23 (tied to a small position in shares on an 8 delta). Overall, options are very active, with 40K calls and 27K puts already traded on the gold miner.

Implied Volatility Movers

Jackson Hewitt (JTX) is down 20 percent to $4.64 after Santa Barbara Bank and Trust said it would not originate tax refund loans for JTX in 2010. Shares are reeling and about 8,000 puts traded, compared to 965 calls. Trading is brisk in Jan, Feb, and April $5 puts. April 2.5 puts are seeing interest as well and average implied vols in JTX are up roughly 12 percent to about 82.

Unusual Volume Movers

Jackson Hewitt (JTX) is seeing 5X average daily trading volume, with 15,000 contracts traded and put volume representing 84 percent of today’s activity.

EOG is seeing 4X average trading volume, with 15,000 contracts traded and calls representing 76 percent of today’s trading activity.

Safeway (SWY) is seeing 2X normal trading volume. 5,400 contracts have traded, with call options representing about 95 percent of today’s volume.

Unusual volume (two times or more than normal average volume) is also being seen in General Steel (GSI), Precision Drilling (PDS), and iShares DJ Healthcare Providers (IHF).

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