Your daily options trading wrap up.
Market Sentiment
Stocks are mixed in cautious trading Wednesday. Much of the focus is on oil, where concerns about bubbling crude prices have thwarted any real rally attempts on Wall Street over the past two weeks. WTI Crude (April) hit a high of $105.92 per barrel Wednesday morning, but was recently down 86 cents to $104.16. The only economic stat of the day, a report on Wholesale Inventories, was a non-event. Meanwhile, IBM (NYSE: IBM) is trading up 2.6% and helping the Dow Jones Industrial Average on the heels of the computer maker’s Analyst day. The Dow is up 10 points heading into the final hour. However, the tech-heavy NASDAQ lost 11.5. The CBOE Volatility Index (CBOE: VIX) edged up .08 to 19.90. Trading in the options market is kind of slow, with 6.4 million calls and 5.3 million puts traded so far.
Bullish Flow
Coinstar (NASDAQ: CSTR), which saw bearish flow yesterday on reports Warner Bros is planning movie rental and sales over Facebook, is up 83 cents to $43.01 and order flow is decidedly more bullish today. Gains in the shares are being attributed to a Detweiler report mentioning a possible deal with Wal-Mart Stores (NYSE: WMT). Meanwhile, CSTR March 45 Calls are the most actives with 1037 traded (79% on the Ask). Looks like upside call buyers in CSTR Mar 47.5 Calls and 50 Calls as well. Implied volatility is up 4% to 52.
Brisk trading continues in Star Scientific (NASDAQ: CIGX). CIGX April 2 Calls and CIGX August 2 Calls were busy Tuesday. Today, shares have rallied 38 cents, or 19%, to $2.43 on no obvious news headlines. Meanwhile, today’s option volume is 14,000 calls and 270 puts, or seven times the average daily. The trading is scattered across a variety of contracts. CIGX Mar 2 Calls traded 4900 contracts and are the most actives. Jan and Aug 2.5 calls are busy as well. Implied volatility is up another 7% to 101. Shares of the cigarette maker have now rallied 35.6% since the FDA said menthol doesn’t increase smoker risk on March 1.
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Bearish Flow
Cisco Systems (NASDAQ: CSCO) is off 6 cents to $18.16 and the CSCO April 17 Put was the most actively traded equity options contract in the first hour of trading today. The top trade is 2015-contract block at the 20 cent asking price (market was 19 to 20 cents). The next biggest is a 529-lot, also at 20 cents. Beyond that, most of the action has been smaller sizes. 13,252 traded vs. 29,907 in open interest. The puts are currently 6.3% out-of-the-money and have a delta of -.21. April equity options expire in 37 days and CSCO earnings will not come in to play prior to the expiration, as the company is expected to report around May 12. Meanwhile, implied volatility in Cisco has been steady in recent weeks in the mid-20s, compared to a 52-week high and low of 45 and 20. Shares are down nearly 35% over the past ten months and have taken a hit after each of the past four earnings releases.
Implied Volatility Mover
Glaxo SmithKline (NYSE: GSK) is up 32 cents to $38.48 and GSK puts are busy for a second day. The focus yesterday was in the GSK Mar 37 Puts, which traded 93% on the offer and created 5,948 contracts of new open interest. At 7,297, it’s now the largest position in Glaxo. GSK March 38 Puts are today’s most actives with 5,798 traded (94% on the Ask) and open interest is 1,913. Implied volatility is up 5% to 22.5, as some investors seem concerned about possible downside in GSK shares through the March expiration (next week). It’s probably a play on lupus drug of Human Genome Sciences (NASDAQ: HGSI) where an FDA decision is expected March 10. According to Dow Jones, “Benlysta is one of the most important new drugs in Glaxo’s pipeline”.
Options Flow
Bearish activity detected in iShares Nasdaq Biotechnology Index Fund (NASDAQ: IBB), with 2635 puts trading, or 11 times its recent average daily put volume.
Bearish activity detected in TCF Capital (NYSE: TCB), with 6934 puts trading, or 79 times its recent average daily put volume.
Bullish flow detected in Yum Brands (NYSE: YUM), with 3509 calls trading, or two times its recent average daily call volume.
Increasing volume is also being seen in Yahoo (NASDAQ: YHOO), Potash (NYSE: POT), and JDS Uniphase (NASDAQ: JDSU).
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.
