Your daily options trading wrap up.
According to the University of Michigan’s Sentiment Index, the consumer was a bit more upbeat at the end of May. The index rose to 74.3, from 72.4 mid-month and also ahead of economist estimates of 72.4. The woes in the housing market continue, however. The latest pending home sales report showed an 11.4% plunge in April. Economists were looking for a decline of 1.4%. Nevertheless, stock market averages are holding modest gains in slow trading ahead of the Memorial Day weekend. A 1% rally in the EUR/USD currency pair on diminishing concerns about Greece might be adding some stability to trading on Wall Street. With thirty minutes left before the three-day weekend, the Dow Jones Industrial Average is up 36 points and the NASDAQ has added 11.5.
Trading is brisk in Marvell Technology (NASDAQ: MRVL) today after the integrated circuit maker reported disappointing first quarter results, but in a conference call, guided estimates higher for the second quarter. Shares rallied $1.54 to $16.10. Meanwhile, 75,000 calls and 13,000 puts traded in the name. MRVL June 15 Calls, which are now $1.10 in-the-money, are the most actives with 18,560 traded and with 64% hitting on the bid and 41,000 in open interest (biggest position in MRVL), some investors are likely liquidating positions on the news. June 16, Jun 17, Jul 16 and Aug 17 calls are actively traded as well.
Coca Cola (NYSE: KO) loses 17 cents to $66.53 and the KO Jan 65 – 70 Call Spread is sold at $2.31, 10,000 times. While open interest (OI) is sufficient to cover in both contracts, this might roll a position up in strikes. KO Jan 65 Calls are now 2.4% in-the-money and have OI of 51,454 contracts, which is the largest position in the name. An investor might be closing out a position in those calls after KO gained 8% off March 16 lows.
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MedcoHealth Solutions (NYSE: MHS) shares tumbled $7 to $57.44 on news CVS Caremark (NYSE: CVS) has won a Regence Blue Cross/Blue Shield Government-wide pharmacy benefits contract. Early options trades in MHS include a seller of 7,000 MHS July 65 Calls at 25 cents each, which might be a liquidating trade in the wake of the news. 11,340 now traded against 57,499 in open interest (the largest position in the name). Jul 55 puts, Jul 57.5 puts, July 60 calls and Oct 50 puts are active and trading predominantly on the bid as well. Implied volatility jumped 15% to 28.
Implied Volatility Mover
CBOE Volatility Index (CBOE: VIX) is down .47 to 15.67 and, after four-day slide, almost 22% below the levels seen at the opening bell Monday. Implied volatilities have been falling market-wide since Monday and heading into the three-day Memorial Day break. In VIX options trading today, VIX August 50 Calls are seeing noteworthy volume with 82,700 traded so far against open interest of 1,470 contracts. While the top trades have hit on the bid, one player bought 10,000 at 20 cents. Another 35,000 were bought at an average of 22.5 cents. Earlier in the day, 20,000 (10,000 X 2) were bought at 20 cents. While the buying of these deep out-of-the-money calls might be part of a combination strategy involving other VIX options or futures, the flow does seem to reflect some expectations for a rally in the VIX through mid-August, which is historically one of the more volatile months for the equity market.
Bullish flow detected in Hyperdynamics (AMEX: HDY), with 3204 calls trading, or 2x the recent average daily call volume in the name.
Bullish flow detected in Beazer Homes (NYSE: BZH), with 6422 calls trading, or 7x the recent average daily call volume in the name.
Bearish activity detected in Enterprise Products Partners (NYSE: EPD), with 5664 puts trading, or three times the recent average daily put volume in the name.
Increasing volume is also being seen in CVS, Conagra (NYSE: CAG) and the US Natural Gas ETF (NYSE: UNG).
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.