Your daily options trading wrap up.
Sentiment
Stocks are broadly higher on diminishing fears about the Japanese nuke crisis. After wild trading last week, stocks opened higher after the Nuclear Regulatory Commission said that the situation at the troubled Fukushima Daiichi nuclear plant is stabilized. Merger news also helped after AT&T (NYSE: T) announced it was buying T-Mobile for $39 billion and Charles Schwab (NYSE: SCHW) said it was acquiring OptionsXpress (NASDAQ: OXPS) for about $1 billion. The only economic data on the day was a disappointment after Existing Homes Sales fell to 4.88 million in February, which was down from 5.4 million last month and below expectations of 5.05 million the month before. Still, with stocks moving broadly higher across Asia and Europe overnight, the Dow Jones Industrial Average opened higher and is sporting a 163-point gain heading into the final thirty minutes. The NASDAQ added 45. Options action reflects the bullish sentiment. 9.1 million calls and 6.2 million puts traded so far.
Bullish Flow
Sprint (NYSE: S) is getting hammered today after AT&T announced plans to buy T-Mobile. Concern about competitive pressures has shares down 62 cents to $4.43 in early trading Monday. Meanwhile, 52,000 calls and 17,000 puts traded in Sprint during the first hour. Morning trades include a buyer of 30,000 S May 5.5 Calls at 8 cents each; possibly an investor taking a position on the view that today’s drop in the share price is an overreaction. S April 4.5 Calls and puts are the next most actives.
SunTrust Banks (NYSE: STI) adds 2 cents to $29.61 and the STI April 30 Straddle is sold at $2.25, 3416 times. Volume in the April 30 calls is now 6,373 and 5,775 April 30 puts have traded. Looks like opening activity. Shares are lagging today after the bank announced a $1 billion sale of 5-year notes. The straddle writer is not really a bullish or a bearish trader. Rather, seems to be a bet that shares will hold around $30 through the April expiration in 25 days.
Bearish Flow
GE (NYSE: GE) adds 50 cents to $19.75 and one investor pays 18 cents per contract for GE Sep 12 Puts, 43,500 times. More than 53,000 now traded and the action probably adds to positions opened Friday, when 50,000 were bought at 18 cents. Today’s open interest data indicate new positions initiated Friday. These puts are $7.75, or 39.2%, out-of-the-money. It’s not clear why they’re being bought. A shareholder looking for some “disaster insurance” might have initiated the massive premium purchase.
Implied Volatility Mover
After wild trading Tuesday and Wednesday last week, volume is slowing in the CBOE Volatility Index (CBOE: VIX) pits to start the week. 219,000 calls and 67,000 puts traded on the VIX so far, which is 62% of the 22-day average daily. VIX is down 3.64 to 20.80 and now well off last week’s highs, when the index surged 39% on the 15th and 16th for its best gain since May (when it hit 2010 high of 45.79). VIX is now off 33.5% from the multi-month high set on Wednesday, as risk perceptions are easing on diminishing fears about the Japanese nuke situation. However, some investors are still hedging their bets, as VIX June 32.5 Calls are the most active options. One player initiated a VIX Jun 25 – 32.5 (1X2) Call Ratio Spread at 17.5 cents, 16,500 times. June 32.5s have now traded 57,000 contracts.
Options Flow
Bullish flow detected in Denison Mines (AMEX: DNN), with 2632 calls trading, or two times its recent average daily call volume.
Bullish flow detected in Kinross Gold (NYSE: KGC), with 36,724 calls trading, or three times its recent average daily call volume.
Bullish flow detected in Express (NYSE: EXPR), with 2155 calls trading, or 19 times its recent average daily call volume.
Increasing volume is also being seen in Verizon (NYSE: VZ), and Citigroup (NYSE: C).
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.
