Your daily options trading wrap up.
Sentiment
Earnings news was mixed. While Caterpillar (NYSE: CAT), Merck (NYSE: MRK), and Chevron (NYSE: CVX) moved higher on earnings, Microsoft (NASDAQ: MSFT) is down 4.1% and weighing on both the Dow and NASDAQ on disappointing profit margins. Research In Motion (NASDAQ: RIMM) shares lost 13.5% after the company issued a first quarter earnings warning on diminished Blackberry shipments. Consequently, the Dow Jones Industrial Average is up 43 points and the tech-heavy NASDAQ lost 2. The CBOE Volatility Index (CBOE: VIX) is up .20 to 14.82. Trading in the options market is running about the typical levels, with 7.4 million calls and 6 million puts traded so far.
Bullish Flow
Eastman Kodak (NYSE: EK), which lost 10% on earnings news yesterday, is up 3 cents to $2.88. Early options trades include an EK May-Oct 3.5 Call Spread, bought at 34 cents on AMEX, 5000 times. It probably rolls a position out a few months. EK May 3.5 calls have open interest of roughly 20,000.
SPDR Industrials (NYSE: XLI) is touching new 52-week highs. Shares are up 22 cents to $38.76 and one investor buys 100,000 XLI Jun 40 Calls at 44 cents each. It probably adds to yesterday’s buying, which created 109,779 contracts of new open interest in XLI Jun 40 calls. The exchange-traded fund, which holds GE, United Tech and the other industrial names from the S&P 500, is up 6.2% during the past eight days. Jun 40 calls are now 3.2% out-of-the-money with a delta of .30.
Bearish Flow
Dillards (NYSE: DDS) adds 7 cents to $48.27 and an investor apparently sells the DDS May 35 – 38 Risk Reversal at $10.25, 6000 times, and the DDS June 40 – 45 Risk Reversal at $4.15, 6000 times. Looks like a roll, or closing out a position in May and opening a new bearish risk-reversal, possibly a collar adjustment.
Consumer Discretionary Select Sector SPDR (NYSE: XLY) moves to new 52-week highs today and is up a penny to $40.59. Meanwhile, a 27,650-contract block of XLY Sep 34 Puts is bought-to-open at 48 cents per contract on ISE. 28,800 now traded versus 2,055 in open interest.
Implied Volatility Mover
Microsoft implied volatility is easing and options are heavily traded Friday. Shares are down 4.4% to $25.53 and easily the Dow’s biggest loser after the company posted EPS numbers that topped Street views, but profit margins were short of expectations. 359,000 calls and 212,000 puts traded in the software giant so far. The MSFT Weekly 26 Calls, which saw heavy trading yesterday ahead of the news, are the most actives. Some investors are probably scrambling to salvage time value. The contract is now 1.8% out-of-the-money with less than an hour of life remaining. 67,000 contracts traded. May 26 puts, May 26 calls, May 25 puts and May 27 calls are seeing brisk trading as well, as investors jockey for position ahead of Microsoft’s next short-term move. May options expire in three weeks.
Options Flow
Bullish flow detected in AMR (NYSE: AMR), with 34,043 calls trading, or two times the recent average daily call volume.
Bullish flow detected in Jabil Circuit (NYSE: JBL), with 6323 calls trading, or three times the recent average daily call volume.
Bullish flow detected in Avanir Pharmaceuticals (NASDAQ: AVNR), with 16,204 calls trading, or three times the recent average daily call volume.
Increasing volume is also being seen in Caterpillar, Goodyear Tire (NYSE: GT), and Sprint Nextel (NYSE: S).
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.
