S&P 500 ETF SPY Sees Large Options Trade

Sentiment

Stock market averages are modestly higher on a relatively slow news day Wednesday. Economic data was in focus early after ADP reported that the economy created 217,000 private sector jobs during the month of February. Economists were looking for an increase of 165,000. The strong headline number comes two days before the Labor Department’s key data and seemed to help to ease some of the recent anxiety levels caused by escalating oil prices. Still, the tone of trading on Wall Street remains cautious. Crude is trading up $2.33 to $101.96 a barrel following an air strike today near a Libyan oil infrastructure. With an hour left to trade, the Dow Jones Industrial Average is up 35 points and the tech-heavy NASDAQ has added 17. The CBOE Volatility Index (CBOE: VIX) is down .79 to 20.22. Options volume is on the light side, with 6.9 million calls and 5.7 million puts traded across the nine options exchanges so far.

Bullish Flow

Endeavour Silver Corp. (AMEX: EXK) notches a new 52-week high and is trading up 7.3% to $8.89. Options action is heating up in the Vancouver-based silver miner as well. 6,175 calls and 215 puts traded so far. EXK Mar 7.5 Calls are the most active and might be seeing some closing trades after a four-day 31.5% surge in the share price. 1,873 traded. Mar 10, April 7.5 and April 10 Calls are the next most actives. Implied volatility (IV) is up 2.5% to 79. The bullish trading is likely a play on silver, which is up another 43 cents to $34.85 today.

Bearish Flow

MBIA (NYSE: MBI) trades down 84 cents to $10.21, post-earnings. The top options trade of the day is a MBI May 6 – Aug 7 Put Spread, apparently bought at 54 cents, 5000 times on the International Securities Exchange. Looks like a roll of a bearish position or a hedge for an additional three months. Separately, the MBI May 12 – Aug 14 Call Spread was apparently sold at 2 cents, 1400 times and also possibly rolling activity (buying back May to sell August).

SPYders — S&P 500 ETF (NYSE: SPY) — is up 17 cents to $131.10 and the SPY Apr 123 – 126 – 129 Put Fly was bought this morning at 28 cents, 10,000 times on AMEX. Open interest is sufficient to cover, but this is likely a short-term hedge. The potential profit (excluding commissions) is $2.72 if shares settle at $126 (the body of the fly) at the April expiration, which represents a 3.9% market decline over the next 44 days.

Implied Volatility Mover

AmBev or Companhia de Bebidas das Americas (NYSE: ABV) adds 96 cents to $28.41 abd calls are actively traded today. ABV Mar 28 Calls are the busiest with 2655 traded (71% on the Ask). Similar action is seen in April 28 and October 27 calls. Impled volatility is up 9.5% to 34. Call volume now approaching 7000 contracts (1000 puts). Bullish trading might be a play on earnings, which are expected soon, possibly tomorrow (unconfirmed).

Option Flow

Bullish flow detected in Suntech Power (NYSE: STP), with 10,096 calls trading, or two times its recent average daily call volume.

Bullish flow detected in Silicon Image (NASDAQ: SIMG), with 9352 calls trading, or 12 times its recent average daily call volume.

Increasing volume is also being seen in Weatherford (NYSE: WFT), Metlife (NYSE: MET), and Nike (NYSE: NKE).

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.