Your daily option trading wrap up.

Sentiment

Market action is mixed late Monday. Economic data was in focus early after data showed Personal Incomes up 1% and Spending up .2% in January. Economists were looking for respective increases of .3% and .4%. A bit later, the Chicago Purchasing Manager’s Index surprised to the upside. The gauge of regional manufacturing activity increased to 71.2 in February, which was up from 68.8 the month before and better than the 67.5 that economists had expected. A third report showed pending home sales falling 2.8% in December, which was not as bad as the 3.2% that was expected. Stocks were broadly higher at midday, but the tech-heavy NASDAQ gave up early weakness and is now trading down 7.2 points heading into the final hour. The Dow Jones Industrial Average has added 74. With relatively quiet trading in the commodities and bond markets, there simply isn’t a lot to guide trading. The action has a wait-and-see feel about it. The CBOE Volatility Index (VIX) is off .30 to 18.92. Options volume is on the light side, with 6 million calls and 5 million puts traded so far.

Bullish Flow

Hewlett Packard (NYSE: HPQ) shares are up 2% to $43.54 and the second best gainer in the Dow behind 3M Co. (NYSE: MMM) today. Meanwhile, in HPQ options activity, the HPQ Jan 50 – 55 Call Spread trades at $1 even, 9500 times. In this spread, it appears that the investors bought 9,500 January 50 calls at $1.93 per contract and sold 9,500 January 55 calls at 93 cents. The spread costs $1 and, excluding commission costs, makes a potential $4, if shares really to $55 or beyond by the January expiration. The action comes a few trading days after shares fell 9.6% on earnings news.

Coeur D’Alene (NYSE: CDE) is trading up $3.12 to $30.77 and options order flow is bullish after the Idaho-based silver miner reported a 56 cent per-share quarterly profit, which easily topped Street estimates of 32 cents. 12,000 calls and 2,425 puts trade in the name. CDE March 30 Calls are the most actives with 6000 traded (85% on the Ask), as some players might be looking for the rally to continue over the next 18 days. Some of the activity might be closing. Open interest is 7,863. March 25, March 28 and March 29 calls are also among the most active. CDE March 30 Puts are seeing interest as well. Implied volatility is down about 1% to 49.

Bearish Flow

Power-One (NASDAQ: PWER) with relative weakness and increasing put activity. Shares are down 10.7% to $8.10 and today’s options volume of 12,000 puts and 5,600 calls is more than double the recent average daily volume. The top trade is a 1,337 PWER Mar 7 Put that recently traded at the 10-cent asking price. Looks like an opening buyer. 5,400 now traded. PWER Mar 8 and 9 Puts are busy as well. Looks like mixed trading in Mar 9 calls. Implied volatility is 14% to 58 and today’s flow seems to reflect concerns about additional short-term weakness in shares of the Camarillo, Calif.-based power conversion maker. No news on the stock.

Implied Volatility Mover

HSBC (NYSE: HBC) shares are trading down $2.42 to $54.85 early Monday after the British banking giant reported a 2010 profit of $13.16 billion, which was below the $14 billion that was expected. The stock is under pressure and options volume so far is 9,835 calls and 3045 puts. HBC Mar 55 Calls are the most actives with 5,612 traded, including a block of 3153 at $1.01 when market was 99 cents to $1.02. HBC Mar 57.5 Calls are busy as well, including a 1500 contract block at 32 cents when bid-ask was 28 to 31 cents. HBC Mar 55s Puts are the most active puts and most of the action has been in smaller lots. The top trade is 100 contracts at $1.72. Implied volatility is down 7% to 27 now that the event risk has passed.

Options Flow Trends

Bullish flow detected in Johnson and Johnson (NYSE: JNJ), 31,470 calls trading, or four times its recent average daily call volume.

Bullish flow detected in Con-Way (NYSE: CNW), with 6387 calls trading, or 61 times its recent average daily call volume.

Bullish flow detected in Staples (NASDAQ: SPLS), with 17,920 calls trading, or 18 times its recent average daily call volume.

Increasing volume is also being seen in Marvell Technology (NASDAQ: MRVL), Iron Mountain (NYSE: IRM), and SPDR Utilities Select (NYSE: XLU). 

Frederic Ruffy is the Senior Options Strategist at Whatstrading.com, a site dedicated to helping traders make sense of the complex and fragmented nature of listed options trading.