Your daily options trading wrap up.
Sentiment
Stocks are broadly lower amid ongoing concerns about bubbling crude oil prices. With Moammar Gadhafi forces pounding rebels near important Libyan oil facilities, April West Texas Intermediate crude made a run towards $107 a barrel early Monday. Prices are now up 90 cents to $105.92 and stocks are selling off on concerns about the earnings risk stemming from higher energy costs. Gasoline is trading north of $3.50 per gallon. Meanwhile, the only economic stat of the day was a report on Consumer Credit, which showed an increase to $5 billion in January, from $4.1 billion the month before and more than the $3.3 billion that economists were expecting. Stocks showed little reaction to the data. Instead, the focus is on oil and events in North Africa/Middle East. With an hour to trade, the Dow Jones Industrial Average is down 100 points. The tech-heavy NASDAQ lost 46.5. The CBOE Volatility Index (VIX) added 2.08 to 21.14. Trading in the options market is running about the typical levels, with 7.8 million calls and 6.4 million puts traded.
Bullish Flow
Western Digital (NYSE: WDC) is trading up $4.78 to $34.79 and options volume is three times its average daily volume after the company announced plans to buy Hitachi Global Storage for $4.3 billion in cash. Investors seemed to applaud the move, as shares gapped higher at the open and options volume includes18,000 calls and 9000 puts. WDC Mar 36 Calls are the most actives with 3100 traded. Some investors might be selling the contract, which is 3.5% out-of-the-money with less than 10 trading days of life remaining. Mar 35, Mar 37 and April 35 calls are seeing interest as well. WDC Mar 35 Put is the most active put. Implied volatility is up 13% to 42.5.
Bearish Flow
Arm Holdings (NASDAQ: ARMH), the British chipmaker, loses 67 cents to $28.57 and options volume is three times its average daily volume, being driven by Oct 24 – 27 (3X2) put ratio spreads, 9000 times. The ARMH October 27 Puts are being sold to buy ARMH October 24 Puts in a ratio of 2X3 on the International Stock Exchange. Looks like a small credit (12 to 15 cents or so) is being pocketed on the spread and this position will make its best profits if ARMH makes a dramatic move lower between now and the October expiration. Shares are up 173% over the past year, but down 10% from the 52-week high set mid-Feb.
Implied Volatility Mover
Pharmasset (NASDAQ: VRUS), a Princeton, N.J.-based biotech, is up 20% to $59.80 and options action is heating up as well. 1,830 calls and 280 puts traded. VRUS April 55 Calls, which are now $4.80 in-the-money, are the most active with 1200 traded. The top trade is a 478-contract lot at $4.90 per contract. Implied volatility is up 23 to 53, with no news to explain the action. The company presented at a Citi healthcare conference over the weekend and maybe something positive was said.
Option Flow
Bearish activity detected in Plains Exploration and Production (NYSE: PXP), with 9655 puts trading, or four times its recent average daily put volume.
Bearish activity detected in Temple Inland (NYSE: TIN), with 10,649 puts trading, or 33 times its recent average daily put volume.
Bearish activity detected in InterDigital (NASDAQ: IDCC), with 5384 puts trading, or two times its recent average daily put volume.
Increasing volume is also being seen in Ciena (NASDAQ: CIEN), AMR Corp. (NYSE: AMR), and the Semiconductor HOLDRS ETF (NYSE: SMH).
To read more option analysis and trading ideas visit Trading Strategies.
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.
