Traders Buy BofA Calls, XLI Industrial Puts

by Frederic Ruffy | May 18, 2011 4:15 pm

Your daily options trading[1] wrap up. 


Stock market averages are sporting modest gains on a relatively slow day of trading Wednesday. Crude oil bubbled $3 higher to $100 per barrel and Exxon (NYSE: XOM[2]) and Chevron (NYSE: CVX[3]) are helping the Dow Jones Industrial Average to a 70-point gain. The NASDAQ added 30 after Dell Computer (NASDAQ: DELL[4]) posted earnings that beat Street estimates. The CBOE Volatility Index (CBOE: VIX[5]) is down 1.16 to 16.39. Trading in the options market is slow, but likely to pick up tomorrow and Friday due to the May options expiration. 7.7 million calls and 6.4 million puts have traded so far.

Bullish Flow

Hershey (NYSE: HSY[6]) is trading down $1.98 to $55.10 on news the company’s CEO unexpectedly left to join another firm. The top options trade is a 2100-contract block of HSY Aug 65 Calls at 18 cents. It’s an opening buyer, according to International Securities Exchange data. Another 1,370-block was bought-to-open at 20 cents. 5,860 now traded vs. 385 contracts in open interest. The at-the-money HSY May 55 Puts are busy as well with 3,135 changing hands (76% on the Ask) vs. 1,408 in open interest.

The top single equity options trade on a relatively slow day for the options mart Wednesday is a 21,000-contract block of Jan 12.5 calls on Bank of America (NYSE:BAC[7]). It was bought at 87 cents per contract. Shares are down 11 cents to $11.79 and the BAC Jan 12.5 Call is 6% out-of-the-money with a delta of .45. There’s 505,000 in existing open interest and the second biggest position in BAC. 26,615 now traded. 

Find more option analysis and trading ideas at  Options Trading Strategies[8].

Bearish Flow

SPDR Industrials ETF (NYSE: XLI[9]) is up 28 cents to $37.31 and the XLI Jun 36 – Sep 36 Put Spread is bought at $1, 50,000 times. It likely rolls a position opened on March 22 when the XLI Jun 32 – 36 Put Spread traded a total of 48,000 times. The June 36s are being sold-to-close and the June 32s left open, possibly on the view that the June 32 put will expire worthless. A new position is being opened in the Sep 36 puts. An institutional investor probably initiated the trade as a hedge.

Implied Volatility Mover

Heavy volume in Dell options following better-than-expected earnings and upward guidance today. Shares are up 5% to $16.70 after setting an early 52-week high of $16.94 five minutes into the day. 47,000 calls and 28,000 puts have traded in the first hour and fifteen minutes, with May and June 17 calls leading the most actives. Flow into earnings had been heavily put weighted, with more than 50,000 contracts of open interest at the DELL May 15 Put this morning. Today, however, the DELL May 17 Calls are the most active with 11,940 traded. The contract was trading at 10 cents late yesterday and is bid at 11 cents today. Although shares saw a nice post-earnings pop, the contract remains out-of-the-money and implied volatility crush has taken its toll, resulting in only a small profit for call holders. IV in DELL is off 28.5% to 29.5.

Options Flow

Bullish flow detected in Advanced Micro Devices (NYSE: AMD[10]), with 26,610 calls trading, or two times its recent average daily call volume.

Bullish flow detected in Talbots (NYSE: TLB[11]), with 6179 calls trading, or 12 times its recent average daily call volume.

Bullish flow detected in Western Refining (NYSE: WNR[12]), with 13,643 calls trading, or three times its recent average daily call volume.

Increasing volume is also being seen in Eastman Kodak (NYSE: EK[13]) and Staples (NASDAQ: SPLS[14]).

Frederic Ruffy is the Senior Options Strategist at[15], a site dedicated to helping traders make sense of the complex and fragmented nature of listed options trading.

  1. options trading:
  2. XOM:
  3. CVX:
  4. DELL:
  5. VIX:
  6. HSY:
  7. BAC:
  8.  Options Trading Strategies:
  9. XLI:
  10. AMD:
  11. TLB:
  12. WNR:
  13. EK:
  14. SPLS:

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