Your daily option trading wrap up.
Market Sentiment
Market action is volatile for a second day, as Hewlett Packard (NYSE: HPQ) is seeing a sharp post-earnings sell-off and crude oil is rallying beyond $98 a jug on spreading civil unrest. H-P shares are down 9.9% and easily the biggest loser in the Dow Jones Industrial Average after the computer maker reported earnings late-Tuesday. While the headline number was above expectations, analysts expressed concerns about revenue growth. It’s the second Dow component this week to raise the same worries after Wal-Mart’s (NYSE: WMT) revenue growth forecast disappointed investors Tuesday. Meanwhile, spreading civil unrest continues in oil-producer Libya and, with the death toll there rising beyond 1,000, supply fears have crude oil up another $2.60 to $98.02 a barrel late-Wednesday. Volatility is spilling over into global equity markets. The Dow Jones Industrial Average has lost another 84 points and the NASDAQ is off 24. With about an hour left to trade, the CBOE Volatility Index (VIX) gained .86 to 21.86. Trading in the options market reflects the cautious sentiment. 11.3 million calls and 10 million puts traded so far.
Bullish Flow
Intel (NASDAQ: INTC) is down 3.5% to $21.05 and the second biggest loser in the Dow Jones Industrial Average behind HPQ, which is reeling on disappointing revenue growth numbers. INTC is falling in sympathy and options action is brisk with 104,000 calls and 73,000 puts traded on the chipmaker. The overall flow seems to reflect mixed sentiment, as INTC March 22 Calls have traded 31,884 and are the most actives. Two-thirds of the volume is trading on the offer (Ask). March 21, April 20, and Jan 17.5 puts are seeing brisk trading as well. Some very short-term players appear to be opening new positions in the INTC Weekly (expiring Feb 25) 22 Calls, with 9775 traded. Meanwhile, implied volatility in INTC is up 4.5% to 23.75 and, in a trend seen almost market wide, is up substantially from levels late last week. In fact, INTC volatilities were near 52-week lows around 19 before this week began and have since risen 25%.
Bearish Flow
Longtop Financial Technologies (NYSE: LFT), a Hong Kong-based tech company focused on the financial services industry, is down another 93 cents to $30.31 and has now fallen nearly 15% month-to-date. The stock rallied more than 8% when earnings were reported on Jan. 31. The stock has been under pressure since that time, however, and one investor appears to be bracing for additional losses. A block of 2,689 LFT Jun 25 Puts traded at $1.10 when the market was 55 cents to $1.10. 3,222 contracts now traded versus only 6 contracts of open interest. Implied volatility is up 2.5% to 45.
Implied Volatility Movers
Trading is very heavy in Citi (NYSE: C) during the first hour of Wednesday’s session. 179,000 calls and 275.000 puts traded in the bank, which is four times its typical volume. C Jun 4.5 Puts are the most actives with 93,500 traded. Shares are off 2 cents to $4.67 and some investors might be selling these puts after yesterday’s 4.5% slide in the share price. 62% of the volume has traded on the bid. C Mar 4.5 Puts and C Jun 4 Puts busy as well. Meanwhile, C Jan 7.5 Calls have traded 64,000 contracts (53% on the Bid). Implied volatility is up 6% to 34.5, as options volume picks up and C shares fall for a third consecutive day.
Option Flow
Bullish flow detected in CF Industries (NYSE: CF), with 22,716 calls trading, or three times its recent average daily call volume.
Bearish activity detected in Goodyear Tire and Rubber (NYSE: GT), with 12,432 puts trading, or three times its recent average daily put volume.
Bullish flow detected in Seagate Technology (NASDAQ: STX), with 76,791 calls trading, or five times its recent average daily call volume.
Increasing volume is also being seen in US Oil Fund (NYSE: USO), Exxon (NYSE: XOM), and Chevron (NYSE: CVX).
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.
