Tesla Powers Up as SPY Options Drop

by Frederic Ruffy | May 25, 2011 4:47 pm

Tesla Powers Up as SPY Options Drop

Your daily options trading[1] wrap up.

Sentiment

Stock market averages are sporting gains. Durable Goods showed a drop of 3.6% in April while economists were looking for a decline of about 2%. Retailers Costco (NASDAQ: COST[2]), American Eagle (NYSE: AEO[3]), and Collective Brands (NYSE: PSS[4]) are trading lower on earnings. Yet, the Dow Jones Industrial Average is up 72 points late in the day with help from Exxon (NYSE: XOM[5]) and Chevron (NYSE: CVX[6]) after crude oil gained $1.66 to $101.25 on bullish weekly inventory data. Meanwhile, the NASDAQ added 22. The CBOE Volatility Index (CBOE: VIX[7]) slipped 1 point to 16.82. Trading in the options market is slow for a second day with 7.4 million calls and 5.4 million puts traded so far.

Bullish Flow

Tesla Motors (NASDAQ: TSLA[8]) gained $1.38 to $28.10 and options volume is approaching five times the average daily on news the company’s CEO will buy 1.5 million shares and a Daimler affiliate will purchase 644,000. The stock buys are part of a follow on to a secondary offering of common stock. In options action, 16,000 calls and 3,250 puts have traded on the San Carlos, Calif.-based electric vehicle maker. TSLA June 30 Calls are the most actives with volume is approaching 8,000 contracts, and 61% traded at the ask. July 28 and June 30 calls are seeing brisk trading as well. Upside call buying has implied volatilities increasing by about 20% to 60.

PowerShares Bullish US Dollar Fund (NYSE: UUP[9]) adds 3 cents to $21.75 and one investor pays 15.5 cents per contract for UUP Jun 22 Calls, 10,000 times. Another 15,000-contract block trades at 16 cents, which was also bought. 25,237 contracts now traded and is likely to add to existing interest, which is already 260,000 and the largest position in the ETF. Shares of the bullish dollar fund have gained 50 cents since May 5, primarily due to weakness in the euro.

Find more option analysis and trading ideas at Options Trading Strategies[10].

Bearish Flow

Impressive spread in the SPYders, as the SPDR S&P 500 ETF (NYSE: SPY[11]) adds 88 cents to $132.88 late-Wednesday. Looks like the SPY Jul 112 – 119 — 126 Put Butterfly Spread is bought at 55 cents, 48,800 times. This spread is possibly a short-term hedge, as it makes its best profits if SPY falls to $119 through the July expiration, which represents a 10.4% decline in the S&P 500 over the next 51 days.

Implied Volatility Mover

American Intl. Group (NYSE: AIG[12]) is off $1.04 to $28.42 and falling to new 52-week lows today after pricing a public offering at $29 per share. The top options trade so far today is an 11,000 contract block of AIG Jun 35 Puts at $6.70, which was sold along with stock and probably a closing of deep out-of-the-money puts. 49,000 calls and 37,000 puts now traded in AIG. Implied volatility has eased 8% to 34, now that the event risk has passed.

Option Flow

Bullish flow detected in Northern Dynasty Minerals (AMEX: NAK[13]), with 4296 calls trading, or eight times its recent average daily call volume.

Bearish activity detected in Acorda Therapeutics (NASDAQ: ACOR[14]), with 2760 puts trading, or three times its recent average daily put volume.

Bullish flow detected in Carters (NYSE: CRI[15]), with 2005 calls trading, or 26 times its recent average daily call volume.

Increasing volume is also being seen in Allstate (NYSE: ALL[16]), El Paso (NYSE: EP) and Williams Companies (NYSE: WMB[17]).

Frederic Ruffy is the Senior Options Strategist at Whatstrading.com[18], 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. COST: http://studio-5.financialcontent.com/investplace/quote?Symbol=COST
  3. AEO: http://studio-5.financialcontent.com/investplace/quote?Symbol=AEO
  4. PSS: http://studio-5.financialcontent.com/investplace/quote?Symbol=PSS
  5. XOM: http://studio-5.financialcontent.com/investplace/quote?Symbol=XOM
  6. CVX: http://studio-5.financialcontent.com/investplace/quote?Symbol=CVX
  7. VIX: http://studio-5.financialcontent.com/investplace/quote?Symbol=VIX
  8. TSLA: http://studio-5.financialcontent.com/investplace/quote?Symbol=TSLA
  9. UUP: http://studio-5.financialcontent.com/investplace/quote?Symbol=UUP
  10. Options Trading Strategies: http://investorplace.com/category/options-trading/trading-strategies/
  11. SPY: http://studio-5.financialcontent.com/investplace/quote?Symbol=SPY
  12. AIG: http://studio-5.financialcontent.com/investplace/quote?Symbol=AIG
  13. NAK: http://studio-5.financialcontent.com/investplace/quote?Symbol=NAK
  14. ACOR: http://studio-5.financialcontent.com/investplace/quote?Symbol=ACOR
  15. CRI: http://studio-5.financialcontent.com/investplace/quote?Symbol=CRI
  16. ALL: http://studio-5.financialcontent.com/investplace/quote?Symbol=ALL
  17. WMB: http://studio-5.financialcontent.com/investplace/quote?Symbol=WMB
  18. Whatstrading.com: http://www.whatstrading.com/

Source URL: http://investorplace.com/2011/05/tesla-powers-up-as-spy-options-drop-tsla-vix-aig-uup/
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