Silver Tanks, Option Traders Adjust

by Frederic Ruffy | May 4, 2011 4:29 pm

Your daily options trading[1] wrap up.


Stock market averages are down for a third day. Economic data weighed on early trading after ADP reported that the economy added 179,000 private sector jobs in April. The number, which fell short of economist estimates by 21,000, comes two days before the Labor Department releases its key payroll report. Meanwhile, crude oil is also falling for a third session on bearish weekly inventory data. Crude was recently down $1.85 to $109.20 a barrel. Gold gave up $22.3 to $1518.20. The Dow Jones Industrial Average has given up 80 points, but is now 55 points off session lows. With 40 minutes left to trade, the tech-heavy NASDAQ is down 9.5. The CBOE Volatility Index (CBOE: VIX[2]) is up .43 to 17.13 amid defensive trading in the options pits, with 8.6 million calls and 8.4 million puts traded so far.

Bullish Flow

STEC (NASDAQ: STEC[3]) shares are up 4.2% to $20.23 and options order flow in the storage device maker is bullish. 8,940 calls and 490 puts traded in STEC so far. The top trade is a 230-lot of STEC Aug 18 Calls at the $3.70 asking price. It was part of a multi-exchange sweep of 1,245 contracts and an opening buyer, according to International Securities Exchange data. Volume approaching 7,000 contracts. Open interest is only 64. Looks like opening buyers of STEC Aug 26 Calls as well. The company announced today “the availability of its 128MB — 16GB MACH2+ CompactFlash (CF) embedded SSD, which are designed to deliver an advanced level of data integrity, reliability and performance to the embedded systems market.” But it’s not clear whether the news is driving the unusual options activity. Earnings, due May 10 (after market), might be a factor as well.

The top equity options trade so far today is in Citigroup (NYSE: C[4]) after an investor sold 30,000 C Jan 5.5 Calls at 9 cents. It was part of a ratio spread. 10,000 C Jan 4.5 Calls were bought at 42 cents. The strategist paid 15 cents for the 1X3 spread and is probably targeting a move towards $5.5 in Citi shares through mid-Jan. 2012. Shares are flat at $4.52.

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

Bearish Flow

It’s been another day of heavy trading in the iShares Silver Fund (NYSE: SLV[6]). Shares are trading down $1.78 to $38.80 and volume is approaching 1.5 million contracts. Silver (July) lost another $2.87 to $39.73 and has now tumbled 18.3% on the week. The sharp decline in the metal follows a nearly 80% surge since late-January. Now, players are scrambling to adjust positions. The top trades in SLV are part of a spread. An investor sold the SLV May 36 – 38 Put Spread at 76 cents, 25,000 times, and might be closing or adjusting an existing position. May 36 and 38 puts are the most actives. May 35, May 40, Jun 35 and June 39 puts are heavily traded as well.

Implied Volatility Mover

Murphy Oil (NYSE: MUR[7]) is down 2.7% to $72.64 and MUR May 70 Puts are seeing interest ahead of earnings. 4,680 traded (82% on the Ask) versus 2,330 in open interest. Implied volatility is up 6% to 34.5. Shares of the oil refiner are on a three-day 6.2% skid ahead of the results, which are due out after the closing bell.

Options Flow

Bullish flow detected in KLA-Tencor (NASDAQ: KLAC[8]), with 5116 calls trading, or three times the recent average daily call volume.

Bullish flow detected in Alpha Natural Resources (NYSE: ANR[9]), with 27,097 calls trading, or three times the recent average daily call volume.

Bearish activity detected in Raytheon (NYSE: RTN[10]), with 5009 puts trading, or five times the recent average daily put volume.

Increasing volume is also being seen in Intel (NASDAQ: INTC[11]), MGM Resorts (NYSE: MGM[12]), and GM (NYSE: GM[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. STEC:
  4. C:
  5. Options Trading Strategies:
  6. SLV:
  7. MUR:
  8. KLAC:
  9. ANR:
  10. RTN:
  11. INTC:
  12. MGM:
  13. GM:

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