Your daily options trading wrap up.
Stock market averages are in the red, but well off session lows late-Tuesday. Hewlett Packard (NYSE: HPQ) shares are down 7.5% and taking down the Dow Jones Industrial Average after the computer maker reported second quarter earnings that beat Street estimates, but then guided estimates lower for the third quarter and the full year. Wal-Mart (NYSE: WMT) also slipped on profit news, but Home Depot (NYSE: HD) is seeing post-earnings strength. Meanwhile, the day’s economic data disappointed. Housing Starts fell to annual rate of 523,000 in April, down from 585,000 the month before and below expectations of 563,000. Industrial Production showed no improvement in April. Crude oil and gold are also lower again today. Crude is off 25 cents to $97.12 and gold lost $8.6 to $1,482. The Dow is down 82 points, but 87 points off session lows. The NASDAQ lost just 4 points. The CBOE Volatility Index (CBOE: VIX) eased .46 to 17.78. Options volume is respectable, with 9.2 million calls and 8.3 million puts traded so far.
Hewlett is down $2.65 to $37.15 and touching new 52-week lows today after the computer maker pre-released earnings that beat Street estimates, but issued disappointing downside guidance. In options action an investor bought 12,000 HPQ Jan 35 Calls at $4.60 each. The contract is $2.15 in-the-money and has open interest of 39,420, the second largest position in HP. Volume in HPQ is now 157,000 calls and 131,000 puts against .average daily of about 30,000. Volume in the Jan 35 calls is 36,640. May 37s, which expire at the end of the week, are the next most actives with 20,230 changing hands.
GE (NYSE: GE) loses 17 cents to $19.59 and it looks like the GE Jan 20 Straddle is sold at $3.49, 10,000 times on International Securities Exchange. It might be closing and/or a bet that shares will stay in a range around $20 through mid-January 2012. The profit range is between $16.51 and $20.39.
Bearish activity detected in Chesapeake Energy (NYSE: CHK), with 38,000 puts trading, or three times its recent average daily put volume. Shares are down 69 cents to $28.93 and the top trade is a 24,400-contract block of CHK Jan 17.5 Puts at 45 cents when the market was 40 to 46 cents. 25,800 traded vs. 5,864 in open interest. The bearish trading comes after 13F filings with the Securities and Exchange Commission showed Carl Icahn reducing his stake in CHK to 2 million from 20.9 million shares.
Implied Volatility Mover
Dell Computer (NASDAQ: DELL) battled back from morning weakness and is flat at $15.99. Shares slid in early trading following the HP quarterly release and guidance. DELL, which reports after the closing bell today, fell in sympathy and hit a morning low of $15.77. Meanwhile, trading in DELL options is very heavy with 104,000 puts and 62,000 calls traded so far. The top trade of the day is a DELL May 14 – 15 (2X1) Put Ratio Spread at 6 cents, 4750 times; possibly a short-term hedge, as it appears to be targeting $14 through the expiration, or a decline of 12.4% over the next few days. May 14 and 15 puts are the most actives as well, with more than 20,000 traded in each. May 16 puts, May 17 calls, Jun 16 puts, Jun 17 calls, and Aug 15 puts are seeing brisk trading as well. Implied volatility has eased 5% to 38.5, as some of today’s volume is likely unwinding or closing trades ahead of Dell’s earnings.
Bullish flow detected in NVIDIA (NASDAQ: NVDA), with 90,057 calls trading, or three times its recent average daily call volume.
Bullish flow detected in Take Two Interactive Software (NASDAQ: TTWO), with 5118 calls trading, or five times its recent average daily call volume.
Bearish activity detected in VanceInfo Technologies (NYSE: VIT), with 5509 puts trading, or six times its recent average daily put volume.
Increasing volume is also being seen in Micron (NASDAQ: MU), U.S. Bancorp (NYSE: USB), and Kinross Gold (NYSE: KGC).
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.