Bulls Flock to Retailers American Eagle, Saks

by Frederic Ruffy | May 24, 2011 5:36 pm

Your daily options trading[1] wrap up.

Sentiment

Stocks are mixed in a slow day of trading. New Home Sales came in at 323,000 in April, 22,000 better-than-expected but the data didn’t have much market impact. Dow Jones Industrial Average was holding modest gains at midday with help from Exxon Mobile (NYSE: XOM[2]) and Chevron Texaco (NYSE: CVX[3]) as crude oil gained $1.80 to $99.50 per barrel. However, relative weakness in GE (NYSE: GE[4]), JPMorgan (NYSE: JPM[5]) and Boeing (NYSE: BA[6]) are seeing relative weakness and keeping a lid on any real rally attempts. Meanwhile, NASDAQ lost 6.5. The CBOE Volatility Index (CBOE: VIX[7]) is down .59 to 17.68 on a slow day for the options market with 5.9 million calls and 5.2 million puts traded so far.

Bullish Flow

Pre-earnings action in American Eagle (NYSE: AEO[8]) today. Shares are up 11 cents to $13.63 and recent trades include a multi-exchange sweep of 5,000 AEO Jun 15 Calls at the 25-cent asking price. ISEE data indicate a customer bought-to-open a new position. 6,265 now traded. Another sweep of 1,668 AEO Nov 14 Calls traded at the $1.35 asking price. 1,839 have now changed hands. The stock of the apparel retailer lost 7.5% Friday on disappointing earnings from competitors Aeropostale (NYSE: ARO[9]) and The Gap (NYSE: GPS[10]). Today’s call buyers might be taking bullish positions on the view that the bad news has now been discounted heading into AEO’s earnings, which are due out tomorrow morning. Shares are down nearly 15% over the past month.

Steve Smith notes for Whatstrading.com today that: Saks (NYSE: SKS[11]) shares are off 7 cents to $10.85 and option volume 13 times the daily average, being driven by 25,000 contract block of the SKS August 10 Puts which were sold at the 40 cent bid. This appears to be an opening sale and likely tied to stock. The trade coincided with a block of 725,000 shares at $10.92.

Bearish Flow

The most actively traded equity options early Tuesday were in Cisco (NASDAQ: CSCO[12]) with the Jan 16 Puts, Jan 12.5 puts, and Jul 16 calls. The activity includes a ratio spread, in which the strategist apparently sold 10,000 CSCO Jan 16 Puts at $1.29 and bought 20,000 CSCO Jan 12.5 Puts at 29 cents. This 1X2 put ratio back-spread might be a closing trade or rolling activity, as open interest is sufficient to cover in both contracts. Jan 16s have now traded 21,251 contracts. Meanwhile, volume in the CSCO Jul 16 Calls is 16,229 contracts and, with 96% trading at the Ask, it looks like buyers are dominating the action. CSCO is down 4 cents to $16.31 today and came under fire on May 12 after earnings were reported. Shares lost 4.8% on the news and are down another 3.7% since that time. A fresh 52-week low of $16.22 was set yesterday.

Implied Volatility Mover

China-Biotics (NASDAQ: CHBT[13]) implied volatility is reaching extremes, as shares lose another $1.37 to $7.87. The stock has now suffered a 35.7% slide in less than a week. The precipitous decline seems to reflect concerns about US-listed shares of Chinese companies after recent debacles like China Medical Express (NASDAQ: CCME[14]) and China Agritech (NASDAQ: CAGC[15]). Meanwhile, today’s options volume in CHBT is 7,650 calls and 8,630 puts. Players are taking positions in anticipation of the stock’s next move and implied volatility is up 14% to 210.

Options Flow

Bearish activity detected in Lender Processing Services (NYSE: LPS[16]), with 3926 puts trading, or two times the recent average daily put volume.

Bullish flow detected in Office Depot (NYSE: ODP[17]), with 5727 calls trading, or two times its recent average daily call volume.

Bullish flow detected in Harris (NYSE: HRS[18]), with 3470 calls trading, or six times its recent average daily call volume.

Increasing volume is also being seen in ITT Industries (NYSE: ITT[19]), Pulte Group (NYSE: PHM[20]), and Hovnanian (NYSE: HOV[21]).
Frederic Ruffy is the Senior Options Strategist at Whatstrading.com[22], a site dedicated to helping traders make sense of the complex and fragmented nature of listed options trading.

Endnotes:
  1. options trading: http://investorplace.com/options-trading/
  2. XOM: http://studio-5.financialcontent.com/investplace/quote?Symbol=XOM
  3. CVX: http://studio-5.financialcontent.com/investplace/quote?Symbol=CVX
  4. GE: http://studio-5.financialcontent.com/investplace/quote?Symbol=GE
  5. JPM: http://studio-5.financialcontent.com/investplace/quote?Symbol=JPM
  6. BA: http://studio-5.financialcontent.com/investplace/quote?Symbol=BA
  7. VIX: http://studio-5.financialcontent.com/investplace/quote?Symbol=VIX
  8. AEO: http://studio-5.financialcontent.com/investplace/quote?Symbol=AEO
  9. ARO: http://studio-5.financialcontent.com/investplace/quote?Symbol=ARO
  10. GPS: http://studio-5.financialcontent.com/investplace/quote?Symbol=GPS
  11. SKS: http://studio-5.financialcontent.com/investplace/quote?Symbol=SKS
  12. CSCO: http://studio-5.financialcontent.com/investplace/quote?Symbol=CSCO
  13. CHBT: http://studio-5.financialcontent.com/investplace/quote?Symbol=CHBT
  14. CCME: http://studio-5.financialcontent.com/investplace/quote?Symbol=CCME
  15. CAGC: http://studio-5.financialcontent.com/investplace/quote?Symbol=CAGC
  16. LPS: http://studio-5.financialcontent.com/investplace/quote?Symbol=LPS
  17. ODP: http://studio-5.financialcontent.com/investplace/quote?Symbol=ODP
  18. HRS: http://studio-5.financialcontent.com/investplace/quote?Symbol=HRS
  19. ITT: http://studio-5.financialcontent.com/investplace/quote?Symbol=ITT
  20. PHM: http://studio-5.financialcontent.com/investplace/quote?Symbol=PHM
  21. HOV: http://studio-5.financialcontent.com/investplace/quote?Symbol=HOV
  22. Whatstrading.com: http://www.whatstrading.com/

Source URL: http://investorplace.com/2011/05/bulls-flock-to-retailers-american-eagle-saks-vix-aeo-csco-saks-chbt/
Short URL: http://invstplc.com/1fymPSW