Your daily options trading wrap up.
Sentiment
Stock market averages are holding modest gains in a day of very slow trading Monday. Economic data was in focus early after a report showed personal spending up .7% in February, which was .2% better than expected. Incomes rose .3% and in-line with estimates. AT&T (NYSE: T) and Verizon (NYSE: VZ) are higher and helping the Dow Jones Industrial Average on an analyst upgrade of the telecommunication sector. Crude oil is down $1.49 to $103.91 a barrel and gold lost $7.2 to $1419 an ounce. Concerns about escalating conflict in Libya, the European debt crisis, and the Japan nuke disaster continue to affect sentiment, but overall there’s hasn’t been much volume or volatility today. The Dow has traded in a narrow 52-point range and is up 24 points. The NASDAQ is flat. CBOE Volatility Index (CBOE: VIX) gained .53 to 18.44. With 50 minutes left to trade, 6.6 million calls and 4.3 million puts have traded across the nine options exchanges.
Bullish Flow
Citi (NYSE: C) loses 4 cents to $4.42 and the top options trade in the bank today is a C July 4.5 Straddle sold at 49 cents, 16,750 times, which appears to be a bet that the stock will drift towards $4.5 through July. Earnings will come into play on April 18 and the contracts will be adjusted due to a 10-for-1 reverse stock split, which will take place on May 6. Today’s noteworthy trades in Citi also include C July 4.5 – 5 Call Spreads, which have traded multiple times. 10,000 were bought at 16 cents and looks like a bullish spread targeting $5 per share.
MEMC Electronic (NYSE: WFR) loses 4 cents to $12.87 and the WFR Apr 13 – May 13 Call Spread is seeing interest in early trading Monday. 300 traded at 49 cents on the International Securities Exchange. Looks buyer-initiated. Volume in both contracts now exceeds 3000 and the spread trading might be rolling of a bullish position, out from April to May. The April 13 calls are 13 cents out-of-the-money and expire in 18 days. Open interest is 9,000 and the third largest position in MEMC.
Bearish Flow
Wells Fargo (NYSE: WFC) loses 6 cents to $31.88 and a block of 18,693 WFC Jan 35 Calls trades at $2.03 this morning on ISE. The market was $2.03 to $2.07 and the trade might be a liquidating sale, as open interest is 73,761 and currently the biggest position in WFC. More than 20,000 now traded. The contract is 9.8% out-of-the-money with a delta of .40.
Implied Volatility Mover
Walter Investment Management (AMEX: WAC), a Tampa, Fla.-based REIT and asset manager, is trading down $1.81 to $17.47 and implied volatility is up after the company announced plans to buy Green Tree for $1.07 billion. Walter Investment will take on $20 million in debt and issue 1.8 million shares. The deal is expected to close in the third quarter and WAC will no longer qualify as a REIT. The most active options are the WAC September 20 Calls with 3356 traded (64% at the Ask) vs. 204 in open interest. Meanwhile, Sep 17 and 18 puts are the next most actives and trading 55% on the bid. So, while the stock is reeling, the overall flow looks somewhat bullish. Implied volatility is up 35% to 27.
Options Flow
Bullish flow detected in Lululemon Athletica (NASDAQ: LULU), with 16,158 calls trading, or two times its recent average daily call volume.
Bullish flow detected in Radian Group (NYSE: RDN), with 6084 calls trading, or three times its recent average daily call volume.
Bearish activity detected in Limited Brands (NYSE: LTD), with 5202 puts trading, or 10 times its recent average daily put volume.
Increasing volume is also being seen in Eastman Kodak (NYSE: EK), Nokia (NYSE: NOK), and Halliburton (NYSE: HAL).
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.
