Options Wrap Focus on BofA, Target

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Your daily options trading wrap up.

Sentiment

Stocks opened sharply lower and remain in the red late-Tuesday. Alcoa (NYSE: AA) shares are down 6.3% and easily the biggest loser in the Dow Jones Industrial Average after the aluminum-maker kicked off the earnings-reporting season with EPS numbers that beat Street views, but revenues that fell short of expectations. The economic calendar included a Trade Balance of -$45.8 billion in February, which was in-line with expectations. The primary focus seems to be some pre-earnings jitters, however, and the problems facing areas around Tokyo. The Dow Jones Industrial Average is down 126 points and the NASDAQ lost 31. The CBOE Volatility Index (CBOE: VIX) gained .86 to 17.45. Trading in the options market is busy and clearly more defensive than in recent days with 9.3 million calls and 8.1 million puts traded so far.

Bullish Flow

Bank of America (NYSE: BAC) BAC April 14 Calls are the most actively traded equity options contract Tuesday morning. The top two trades are 10,000-contract blocks at 6 cents each. Shares are down 12 cents to $13.37 and these calls are now 4.5% out-of-the-money. 36,000 contracts have traded and open interest is 364,528, which is the fourth largest position in BofA. Delta is .17, as the contract has three and half days of life remaining. Some investors are likely closing out positions. Others might be taking new positions and hoping for a post-earnings rally in shares. BofA is due to release earnings the morning of options expiration Friday.

Find more option analysis and trading ideas at Options Trading Strategies.

Bearish Flow

Steve Smith notes for Whatstrading.com today that Target (NYSE: TGT) shares are up 45 cents to $49.70 and there is notable volume in the TGT Oct 48 Puts as two large blocks trade at the offer of $3 and $3.05. A total of 10,000 contracts now traded. Shares of TGT have been one of the worst performers among big box general merchandise retailers declining some 17% for the year to date. While open interest is sufficient to cover, sentiment data suggest opening put purchases in TGT today. Some might be tied to stock, as two blocks totaling 93,000 shares (53,000 and 40,000) also traded this morning. The company offered an investor update today at an International Securities Exchange Group Retail Summit. Expects EPS of $8 and revenues of $100 billion by 2016/2017.

Implied Volatility Mover

Two days of put buying and then a tumble for Longtop Financial (NYSE: LFT). Shares are down $4.50 to $26.55 and falling to session lows, near 52-week lows, in heavy trading. Options volume is six times the average daily, with another 14,000 puts and 3,200 calls traded. Looks like some investors are bracing for additional downside in May 20, 22.5 and 25 puts, which are the most actives. April 25 and 30 puts are busy as well. Implied volatility jumped 21% to 97. No news on the stock, but it seems that some investors had been anticipating today’s volatility in the stock over the past two days.

Options Flow

Bullish flow detected in Chimera Investment (NYSE: CIM), with 11,772 calls trading, or nine times its recent average daily call volume.

Bullish flow detected in PowerShares DB US Dollar Index Bullish Fund (NYSE: UUP), with 44257 calls trading, or three times its recent average daily call volume.

Bearish activity detected in CNinsure (NASDAQ: CISG), with 5383 puts trading, or eight times its recent average daily put volume.

Increasing volume is also being seen in Petroleo Brasileiro (NYSE: PBR), Tyco (NYSE: TYC), and iShares Silver Trust (NYSE: SLV).

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.


Article printed from InvestorPlace Media, https://investorplace.com/2011/04/options-wrap-focus-on-bank-of-america-target-bac0tgt-vix-lft/.

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