Your daily options trading wrap up.
Market Sentiment
Stocks are trading mixed on options expiration Friday. With no earnings of importance or economic data reported today, there isn’t a lot of new information to guide the action. Caterpillar (NYSE: CAT) is up 1.7% and helping to keep the Dow Jones Industrial Average above water after the maker of earth moving equipment updated its sales outlook. Nineteen Dow stocks are higher, eleven are lower, and the industrial average is up 47 points heading into the final hour. However, the tech-heavy NASDAQ has lost 3.4. The CBOE Volatility Index (VIX) edged up .24 to 16.83. Trading in the options market is active due to the expiration and heading into a three-day Presidents Day weekend. 8.8 million calls and 6.8 million puts traded so far.
Bullish Flow
A couple of big retailers are seeing increasing options action ahead of earnings next week. Target (NYSE: TGT) loses $1.24 to $51.91 and a block of 10,787 TGT April 60 Calls is bought at 17 cents each today. 15,733 now traded. Open interest is sufficient to cover. 31,000 calls and 13,000 puts now traded on the retailer. Implied volatility is up 4% to 25, as investors look to TGT next earnings due the morning of Feb. 24 and a profit report from Wal-Mart (NYSE: WMT) next week as well.
Speaking of WMT, calls are seeing heavy pre-earnings action. 156,000 contracts traded so far, which is nine times the normal and five and half times the day’s put volume. Shares are up 64 cents to $55.39 and today’s trades include a block of 47,430 WMT March 57.5 Calls at 23 cents each when the market was 21 to 23 cents. Another trade was a buyer of 10,000 WMT March 27.5 Calls at 29 cents. The WMT March 57.5 – 60 Call Spread traded at 21 cents, 17,400 times. Consequently, volume in the Mar 57.5s is now approaching 85,000. Mar 55 and 60 calls are the next most actives. Implied volatility is up 6% to 18.5, as investors seem generally optimistic heading into the world’s largest retailer’s earnings, due Tuesday before the opening bell.
Bearish Flow
5040 puts and 230 calls traded on Gerdau (NYSE: GGB) so far today. Shares have added 18 cents to $14.68 and the focus is on the GGB Mar 14 Puts and includes a 5000 contract block at 35 cents on NYSE AMEX. Market was 25 to 40 cents and an investor might have initiated the trade as a hedge ahead of earnings, expected around March 3 (unconfirmed).
Implied Volatility Mover
23,000 calls and 5,320 puts traded on Pan American Silver (NASDAQ: PAAS). Shares have added $1.77 to $37.17 and the top trade: an opening customer buyer of 5,059 PAAS Mar 38 Calls at $1.40 on the International Stock Exchange, according to ISEE data. 10,500 now traded. Implied volatility is up 9% to 48. It’s possibly a play on silver, which is up 70 cents to $32.27 today and now up more than 20 percent since January 25.
Option Flow
Bearish activity detected in Weight Watchers (NYSE: WTW), 12,072 puts trading, or 11 times its recent average daily put volume.
Bullish flow detected in Jinkosolar (NYSE: JKS) with 9502 calls trading, or nine times its recent average daily call volume.
Bullish flow detected in Medtronic (NYSE: MDT), with 17,679 calls trading, or four times its recent average daily call volume.
Increasing volume is also being seen in Brocade (NASDAQ: BRCD), iShares Silver Fund (NYSE: SLV), and Valero (NYSE: VLO).
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.
