After Hours Report for February 3, 2011 Update 2

Bullish Flow

Tyson (TSN) calls saw heavy trading ahead of its earnings. The meat producer is slated to release results Friday morning. Shares gained 47 cents to $17.56 today and options volume rose to 6.5X the average daily ahead of the news. The top trade of the day was a block of 2,400 February 17 calls on the 70 cent bid, which might have been a liquidating of in-the-money call options. Beyond that, the flow seemed mostly bullish. The next biggest trades were blocks of February 18 calls at the 35-cent asking price. At the end of the day, 6,580 had traded. Another 6,680 April 19 calls changed hands. Total options volume included 22,000 calls and 4,530 puts, as players were clearly favoring calls options over put options ahead of Tyson's results.

Bullish trading was also seen in Yahoo (YHOO), Abercrombie (ANF), and Kimberly Clark (KMB).

Bearish Flow

China MediaExpress (CCME) had a rough afternoon of trading. As noted in the midday report, shares were trading at $15.83 amid heavy put buying late Thursday morning. The selling gathered additional momentum in the second half of trading after Muddy Waters Research accused the company of a "massive pump and dump scheme." The stock finished the day down $5.52 to $11.09 and options volume surged. 58,000 calls and 101,000 puts traded in the name today. Meanwhile, the heavy volume and increasing anxiety levels sent implied volatility options up more than 50 percent to 210.

Bearish flow also surfaced in China Agritech (CAGC), Weyerhaeuser (WY), and Saks (SKS).

Index Trading

Volume was light across the index market again today. 358,000 calls and 523,000 puts traded across the S&P 500 Index (.SPX) and other cash indexes, which is only 75 percent of the recent average daily volume, according to Trade Alert data. The CBOE Volatility Index (.VIX) lost .61 to 16.69. Meanwhile, some of the top index options trades of the day surfaced in the VIX midday when one strategist bought 20,000 June 18 puts at $1.15, sold 20,000 June 17 puts at 70 cents, and sold 20,000 June 16 puts at 40 cents. This three-way spread, sometimes called a "Tree", was initiated for a net debit of a nickel and appears be a bet that VIX will settle near 17 at the June expiration. At that point, the June 18s are worth $1 and the other two contracts expire worthless.


ETF Trading

iShares Dow Jones Transportation Average (IYT) saw more volume than usual. This exchange-traded fund tracks the performance of the Dow Jones Transportation Average and finished the day up 44 cents to $91.12. IYT has added 23.4 percent since late-August, as railroad, air freight, and airline companies have performed generally well during that time. Meanwhile, in options action, 4,625 puts and 460 calls traded on the fund today. The activity was led by March 92 – 85 bearish put spreads, which traded 1,700X. It looks like some investors were paying $1.20 to open new positions in the spread, possibly betting that IYT will head towards $85 or below through the March expiration.

Posted in Commentary, Earnings, Futures, Options, Stocks, Watchlist