Apple Weekly Options Draw Interest

by Frederic Ruffy | May 12, 2011 4:50 pm

Your daily options trading[1] wrap up.


A bunch of mixed data indicators meant a mixed market for much of the day. Jobless claims declined by 44,000 to 434,000 in the week ended May 7, while the Producer Price Index showed a .8 percent up tick in April, and Retail Sales rose .5 percent during that time. Stocks climbed out of a hole in afternoon action and the major averages are posting slim gains heading in the closing bell. The Dow Jones Industrial Average is up 60 points and the NASDAQ added 16.75. CBOE Volatility Index (CBOE: VIX[2]) slipped .72 to 16.23. Trading in the options market is active, with 9 million calls and 7.3 puts having changed hands so far.

Bullish Flow

For the fourth consecutive quarter, Cisco (NASDAQ: CSCO[3]) earnings have resulted in a gap down on its stock chart. Although the company reported earnings that beat Street views, the lowered guidance sent the stock skidding and shares are down 77 cents to $17 late-Thursday. Options are seeing heavy trading. 393,000 calls and 237,000 puts traded in Cisco so far. Action is brisk in the at-the-money May 17 puts and calls. May 18 calls and 16 puts are actively traded. Noteworthy volume is being seen in the CSCO January 20 Calls as well. The contract is $3, or 17.6% out-of-the-money, and more than 55,000 traded. The top trade is a 20,000-contract block bought at 50 cents each. So, while the stock is down, some investors might see the decline as an opportunity to initiate bullish positions in the Jan calls. Prior to today, Cisco shares were finally climbing out of a bearish funk, moving up 7.6% from the 52-week low of $16.52 set on April 19.

Valeant Pharmaceuticals (NYSE: VRX[4]), which rallied around earnings news Monday, is off 91 cents to $50.89 and the VRX Jul 35 — Jan 60 Call Spread is apparently sold at $12.20, 12,000 times. This might exit a position in July 35 calls opened on December 6, when 20,000 contracts traded at $1.05. The stock has rallied more than 80% since that time and 12,000 are being closed out at $16.50. A new bullish position opened in the out-of-the-money VRX Jan 60 Calls at $4.30.

Find more option analysis and trading ideas at Options Trading Strategies[5].

Bearish Flow

Apple (NASDAQ: AAPL[6]) loses $1.41 to $345.82 and the weekly options in AAPL, which expire on Friday the 13th, are seeing interest today. AAPL May Weekly 340 Puts, which are 1.7% out-of-the-money and have a delta of -.13, are the most actives. More than 9,000 traded. Open interest is 8,355 and the contract is bid at 31 cents. Some investors were possibly speculating on weakness in AAPL this morning after Cisco shares suffered a 4.9% post-earnings decline and Apple shares made a run towards $342. However, AAPL May Weekly 345 Calls are seeing interest as well, with volume approaching 9,000 contracts and open interest of 3,804. Weekly 350 calls and 345 puts are seeing brisk trading too. The top trade of the day in Apple options today is in the July puts and calls after the 300 — 365 bullish risk-reversal was apparently bought at $3.69, 700 times. Meanwhile, implied volatility in AAPL is up 2.5% to 21, but near the lower end of its 52-week range of 20 and 52.

Implied Volatility Mover

Goldman Sachs (NYSE: GS[7]) options are seeing brisk trading today after Rochdale analyst Dick Bove lowered his rating on the stock to Sell and said that the Justice Department is facing increasing pressure to launch a criminal lawsuit against the investment bank, according to a report by Bloomberg. Shares are down 3.7% to $142.35. Options volume is 59,000 calls and 83,000 puts, and three times the average daily. GS May 140 Puts, which are now 1.7% OTM, are the most actives with 11,630 traded. GS May Weekly 140 Puts are the second most actives. Meanwhile, IV has increased by 17% to 25.

Options Flow

Bearish activity detected in BHP Billiton (NYSE: BHP[8]), with 17,529 puts trading, or two times the recent average daily put volume.

Bullish flow detected in Avon Products (NYSE: AVP[9]), with 13,415 calls trading, or three times the recent average daily call volume.

Bullish flow detected in Mead Johnson Nutrition (NYSE: MJN[10]), with 5279 calls trading, or four times the recent average daily call volume.

Increasing volume is also being seen in VALE (NYSE: VALE[11]), SINA Corp. (NASDAQ: SINA[12]), and Akamai (NASDAQ: AKAM[13]).

Frederic Ruffy is the Senior Options Strategist at[14], a site dedicated to helping traders make sense of the complex and fragmented nature of listed options trading.

  1. options trading:
  2. VIX:
  3. CSCO:
  4. VRX:
  5. Options Trading Strategies:
  6. AAPL:
  7. GS:
  8. BHP:
  9. AVP:
  10. MJN:
  11. VALE:
  12. SINA:
  13. AKAM:

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