by Frederic Ruffy | May 26, 2011 4:27 pm
Your daily options trading wrap up.
Data released before the start of trading Thursday showed the economy growing at an annual rate of 1.8% in the first quarter while economists were looking for it to increase by 2%. Separate data showed weekly jobless claims increasing to 424,000 in the period ended May 21 while economists were expecting a decline to 400,000 from 414,000. Yet, market averages seemed to brush aside the poor data and trading was mixed into midday. Microsoft (NASDAQ: MSFT) is leading the Dow Jones Industrial Average and is also helping the NASDAQ with a 2.5% advance. The Dow is up 18 and the NASDAQ has added 23. The CBOE Volatility Index (CBOE: VIX) is down .79 to 16.28 and now well off Monday morning highs of 20+. Trading in the options market is slow, as attention is beginning to shift to the three-day Memorial Day weekend. 6.9 million calls and 5.4 million puts traded so far.
Microsoft (NASDAQ: MSFT) shares are up 2.5% to $24.80 and leading the Dow Jones Industrial Average to a modest three-point midday gain after fund manager told an audience at an Ira Sohn conference last night that the software company’s board should oust CEO Steve Ballmer. Options on Microsoft are seeing brisk trading as well. MSFT June 24 Calls, which are 80 cents in-the-money and expiring in three weeks and one day, are the most actives. Volume is more than 19,000 and probably seeing some closing trades following the advance in the share price. June and Weekly 25 calls are the next most actives, as some players might be initiating positions on hopes the gains can continue ahead of the Memorial Day weekend and over the next few weeks. However, shares face resistance just north of current levels, which corresponds to a recent low seen on April 19 ($24.87) and a recent high ($24.88) from May 19.
El Paso (NYSE: EP), which prior to today saw an 11.2% two-day rally on news it was splitting into two companies, is off 43 cents to $20.68. In early options action, one investor takes a position in the EP July 20 Buy-Write while buying EP Jul 17 Puts, 6000 times. Looks like an opening collar with a potential of 2.4% gain if shares hold above $20 through the July expiration. Shares were bought at $20.80 and $1.26 collected on the risk-reversal.
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Tiffany (NYSE: TIF) shares surged $6.20 to $76.24 after the company reported better-than-expected first quarter earnings and raised guidance for the 2012 fiscal year. Options action is picking up as well, with 12,000 calls and 15,000 puts traded in the New York-based jeweler so far. The volume represents nine times its average daily. TIF Jun 75 Calls, which are now $1.24 in-the-money, are the most actives. 2,650 traded against open interest of 2,074. The top options trades are on the put side of the options chain after an investor initiated a TIF Jun 70 – 75 Put Spread at $1.12, 540 times on the ISE. Looks like a bearish short-term play or perhaps to hedge some of today’s gains in the stock.
Implied Volatility Mover
Big Lots (NYSE: BIG) trades down 89 cents to $31.44 after reporting better-than-expected first quarter earnings, but then guiding estimates down for the second quarter and the fiscal year. The company also signed an agreement to acquire Canada’s Liquidation World for 1.8 million (CAD). Shares are down and a noteworthy trade today is a 10,000-contract bock of BIG Oct 27.5 Puts, sold at $1.15. The trade is tied to 250,000 shares at $31.25 and seems to reflect expectations that shares will hold above $27.50 through the fall. Meanwhile, short-term players are focused on Jun 30 and 32.5 puts and 32.5 and 35 calls in BIG. Implied volatility has dropped 26% to 31.
Bullish flow detected in STEC (NASDAQ: STEC), with 11,039 calls trading, or two times the recent average daily call volume.
Bearish activity detected in VeriFone Systems (NYSE: PAY), with 13,859 puts trading, or four times its recent average daily put volume.
Bullish flow detected in Silicon Graphics International (NASDAQ: SGI), with 6352 calls trading, or eight times its recent average daily call volume.
Increasing volume is also being seen in Marvell Technology (NASDAQ: MRVL) and SandRidge (NYSE: SD).
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.
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