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Bullish flow detected in EZchip Semiconductor (NASDAQ: EZCH), with 3534 calls trading, or two times its recent average daily call volume.
Bullish flow detected in New York Times (NYSE: NYT), with 5111 calls trading, or five times its recent average daily call volume.
Bullish flow detected in VeriSign (NASDAQ: VRSN), with 19,666 calls trading, or 12 times its recent average daily call volume.
Increasing options activity is also being seen in Chesapeake (NYSE: CHK), F5 Networks (NASDAQ: FFIV), and Vulcan Materials (NYSE: VMC).
Sentiment
Stocks opened higher and are holding gains late-Monday on a relatively slow news day. The focus early was on a round of corporate deal-making. Ensco (NYSE: ESV) is buying Pride International (NYSE: PDE) and Danaher (NYSE: DHR) made a bid for Beckman Coulter (NYSE: BEC). AOL (NYSE: AOL) announced plans to buy news web site The Huffington Post. The earnings calendar is light. Humana (NYSE: HUM) slipped when its earnings were released. Loews Corp. (NYSE: L) and Lorillard (NYSE: LO) are seeing post-earnings gains. The only economic stat on the docket was the latest report on Consumer Credit, which showed an increase of more than $6 billion in December. Economists were looking for an increase of between $2 and $3 billion. The market showed little reaction to the data. Instead, Monday’s gains on Wall Street appear driven by the day’s merger activity and diminishing fears about problems overseas. With less than an hour to trade, the Dow Jones Industrial Average is up 75 points. The tech-heavy NASDAQ added 14. The CBOE Volatility Index (VIX) edged up .49 to 16.42. Trading in the options market is active and reflects the bullish underlying sentiment, with 8.6 million calls and 6.6 million puts traded so far.
Bullish Flow
Cisco Systems (NASDAQ: CSCO) is up for a sixth straight trading session, as optimism seems to be building ahead of the networking giant’s earnings, due Wednesday after market. Shares are up 17 cents to $22.21 through midday Monday and have now added 6.2% since January 28. Meanwhile, CSCO Mar 23 Calls and CSCO Feb 22 Calls are today’s most actively traded equity options contracts. The top trade in the March 23 calls, where volume is 36,620, is a block of 5,546 at the 50-cent ask price. Meanwhile, 28,654 Feb 22 calls have traded and the biggest trade is 5000 on the 78-cent bid. Some investors might be selling the spread and rolling (closing in-the-money Feb 22 calls to buy out-of-the-money Mar 23s) ahead of the news. A total of 130,000 calls and 33,000 puts have already traded in Cisco. Implied volatility is flat around 30.
Ford Motor (NYSE: F) adds 46 cents to $16.18 and 4,170 F Feb 16 Calls were apparently sold at 45 cents to buy the F Jun 16 – 20 Call spread at $1.16, 4170 times. The three-way spread looks like a roll of a bullish position from February to June. Ford shares approached $19 in mid-January, but then came under pressure when earnings were reported on Jan. 28 and knocked back down towards $15 after a three day 18% loss.
Bearish Flow
IShares Russell 2000 Index (NYSE: IWM) touched a new 52-week high and adds 66 cents to $80.53 on the day. Two noteworthy spreads recently traded in the ETF. In one, the strategist bought 50,000 IWM Mar 77 Puts and sold 100,000 IWM Mar 73 Puts, setting up a 1 times 2 put ratio spread for a 7-cent net debit. A bit earlier, a Mar 72 – 75 – 78 put fly was bought at 26 cents, 20,000 times. Both look like downside hedges through the March expiration, with the vertical spread offering a maximum pay off if shares fall below $73 (a 9.4% decline) and the fly bracing for a move towards $75, or a 6.9% drop.
Implied Volatility Mover
Brisk trading continues in China MediaExpress (NASDAQ: CCME). Shares came under pressure on Friday, Jan. 28 and the selling gathered additional momentum last week after Muddy Waters Research alleged that the Chinese advertising company is engaged in a “massive pump and dump scheme.” The stock suffered a five-day 51.4% debacle before rebounding 20.5% Friday. Shares are down 75 cents to $13.14 today and options volume includes 27,000 calls and 31,000 puts. Of the total volume, 60.3% is in the front-month February options. CCME Feb 14 Puts top the most actives, followed by CCME Feb 15 Calls. Players are also showing interest in Feb 10, 13 and 15 puts. The overall flow seems to reflect concerns about additional losses in CCME into the Feb expiration (11 days to go) and implied volatility, which hit a high of 218 during the peak of the panic last week, and is up 7% to 154 today.
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.
