Your daily options trading wrap up.
Sentiment
Stock market averages held gains yesterday on another slow news day. Investors shrugged off the Conference Board’s latest Consumer Confidence Index. The gauge fell to 63.4 in March, from 72 in February and also below economist estimates of 65. The Dow Jones Industrial Average moved higher in mid-morning trading despite the poor data. Beyond that, there wasn’t much economic or earnings news to guide the action. Home Depot (NYSE: HD) is the best gainer in the Dow on share buyback plans. AT&T (NYSE: T) and Verizon (NYSE: VZ) are also helping the industrial average for a second day following yesterday’s analyst rating upgrade. In other markets, crude oil has erased early losses and is up 88 cents to $104.86 a barrel. Gold lost $2.90 to $1417 an ounce. The Dow Jones Industrial Average has added 78 points and the tech-heavy NASDAQ gained 22.5. Trading in the options market is very quiet for a second day. The CBOE Volatility Index (CBOE: VIX) lost .94 to 18.50 and total options volume is 6.1 million calls and 4.6 million puts.
Bullish Flow
Home Depot (NYSE: HD) is up 81 cents to $37.46 and the best gainer in the Dow Jones Industrial Average on news of an accelerated program to buyback $1 billion shares. One investor apparently sells 23,000 HD Aug 34 Puts to buy 11,500 HD Aug 41 Calls, collecting $1.22 on this bullish 1 X 2. Looks like an opening play and a bet that shares will hold above $34 through mid-August, and possibly make a run beyond the 52-week high of $39.38 set after earnings were announced on Feb. 22.
Chinese Internet company Sohu.com (NASDAQ: SOHU) is seeing relative strength and increasing options action Tuesday morning. Shares are up $4.59 to $87.70 and the call buying is scattered across a number of April, May and June calls with strikes ranging from 80 to 105. SOHU April 80 Calls are the most actives with 919 traded including several lots at the $8 asking price. April and June 95 calls are the next most actives. No news on the stock. Other names in the space — Baidu (NASDAQ: BIDU), Youku.com (NYSE: YOKU), and Netease.com (NASDAQ: NTES) — are also seeing strength today.
Bearish Flow
Apollo Group (NASDAQ: APOL) hit a low of $38 per share today and is down $2.13 to $40.22 after the for-profit education company reported earnings that beat Street views, but offered cautious sales guidance for 2012. Options have been actively traded today. 35,000 calls and 13,000 puts in APOL so far. The top trade is an APOL Jan 50 – 65 Call Spread sold at $1.30, 10,000 times in early trading. More than 11,000 now traded in both contracts. April 39 puts, April 40 puts and April 40 calls are the next most actives.
Implied Volatility Mover
A123 Systems (NASDAQ: AONE) is down and implied volatility is up after the Watertown, Mass-based maker of rechargeable lithium-ion batteries announced plans for an 18 million-share and $125 million in convertible notes offering. Shares are down 96 cents to $6.86 on the news and trading is brisk in the Apr and May 7 puts, which have traded 5360 and 3480 contracts, respectively. Looks like a mix of buyers and sellers driving the flow. Meanwhile, implied volatility is about 28% to 63.
Options Flow
Bullish flow detected in VirnetX Holding (AMEX: VHC), with 8736 calls trading, or four times its recent average daily call volume.
Bullish flow detected in XL Company (NYSE: XL), with 6692 calls trading, or four times its recent average daily call volume.
Bullish flow detected in Skechers (NYSE: SKX), with 7557 calls trading, or eight times its recent average daily call volume.
Increasing volume is also being seen in AT&T (NYSE: T), Liberty Media (NASDAQ: LINTA), and Macy’s (NYSE: M).
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.
