Yahoo, Morgan Busy in Options Today

by Frederic Ruffy | May 16, 2011 4:50 pm

Your daily options trading[1] wrap up.


Trading was cautious after the NY Empire State Index, a gauge of regional manufacturing activity, unexpectedly fell to 11.7 in May. Economists were looking for a decline to 18 from 21.7. Later, the latest NAHB Homebuilder Sentiment Index showed no improvement from the month before. Crude oil lost $2.56 to $97.09 and gold gave back early gains, is now down $1.60 to $1,492 an ounce. Focus turns to earnings from the retail sector tomorrow morning, with Dow components Home Depot (NYSE: HD[2]) and Wal-Mart (NYSE: WMT[3]) due to release results. Housing Starts and Industrial Production numbers might move the markets Tuesday as well. The Dow Jones Industrial Average is now down 40 points and heading to session lows. The tech-heavy NASDAQ lost 42.4. The CBOE Volatility Index (CBOE: VIX[4]) added .81 to 17.88 and nearing the best levels of the day. Trading in the options market is slow, but likely to pick up later in the week due to the expiration.  7.7 million calls and 6.5 million puts traded so far.

Bullish Flow

Yahoo (NASDAQ: YHOO[5]) shares are down 77 cents to $15.78 and have now lost more than 15% since May 9, the day the stock notched a new 52-week high. Shares have been under pressure during the past two days following news that Alibaba spun off control of its Alipay online payment unit without informing Yahoo. Alibiba is 43% owned by Yahoo and the Chinese unit is considered an important investment for the Internet search giant. Options actively traded with the top trade a YHOO Jan 12.5 – 17.5 Risk-Reversal, which traded at $1.08, 5000 times. Looks like calls were bought, puts sold and possibly a closing trade. The next biggest trades are two blocks of 4,000 (8,000 total) YHOO July 14 Puts on the 19 and 20 cent bid. Looks like put selling and tied to 104,000 shares at $16.47 each. 81,000 calls and 47,000 puts now traded in Yahoo.

Morgan Stanley (NYSE: MS[6]) adds 7 cents to $24.20 and call volume was roughly 10,000 contracts early today. The top trade is a 2200-block of MS Jun 26 Calls at 21 cents. More than 5,000 traded. Another 3,750 Jun 26 calls have changed hands. It’s possible upside call buying, bottom-fishing, adding to positions from last week. Calls on Morgan saw active trading on May 11. MS shares notched a 52-week high of more than $31 in mid-February, but have been grinding lower since — losing 21.4% during that time.

Find more option analysis and trading ideas at Options Trading Strategies[7].

Bearish Flow

Dell (NASDAQ: DELL[8]) touched a new 52-week high Wednesday, but has since suffered a three-day 3.9% decline. Shares are down 29 cents to $16.08 and falling to session lows. Meanwhile, 54,000 puts have traded on the computer maker, which is 11 times the expected and compares to call volume of 15,000 contracts. DELL November 16 Puts are the most actives. 13,740 traded. August 15, August 16, November 15, and November 17 puts are seeing interest as well. Implied volatility is up 7% to 41, as investors brace for Dell’s earnings, due tomorrow after market.

Implied Volatility Mover

VIX is up .41 to 17.48 and a noteworthy recent trade in the volatility index is a VIX Jun 25 – 32.5 (1X2) Call Ratio Spread bought at 17.5 cents, 15,000 times. The spread offers a max pay-off if VIX settles at 32.5 at the June expiration, which is 29 days for the VIX contract.

Option Flow

Bullish flow detected in Ivanhoe Mines (NYSE: IVN[9]), with 3505 calls trading, or three times its recent average daily call volume.

Bearish activity detected in Public Service Enterprise Group (NYSE: PEG[10]), with 2636 puts trading, or seven times its recent average daily put volume.

Bullish flow detected in IMAX Corp. (NYSE: IMAX[11]), with 5192 calls trading, or seven times its recent average daily call volume.

Increasing volume is also being seen in NYSE Euronext (NYSE: NYX[12]), and Expedia (NASDAQ: EXPE[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. HD:
  3. WMT:
  4. VIX:
  5. YHOO:
  6. MS:
  7. Options Trading Strategies:
  8. DELL:
  9. IVN:
  10. PEG:
  11. IMAX:
  12. NYX:
  13. EXPE:

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