Market Update – Friday April 1st 2001

 

Bullish Flow
 
Ford Motor (F) shares are up and options actively traded ahead of monthly auto and truck sales numbers. The automakers are due to release their March results Friday. Ford is up 37 cents to $15.28 midday and options volume includes 130,000 calls/48,000 puts. April 16 calls, which are now 4.7 percent out-of-the-money, are the most actives. 36,500 have changed hands. In addition, with 83 percent traded at the ask, some investors appear to be buying these calls and looking for the stock to recapture $16 before the April expiration, which is two weeks from today.
 
Citigroup (C) is trading up 6 cents to $4.47 and call options on the bank are busy Friday morning. 185,000 contracts traded, which isn't unusual for Citi, but it compares to only 70,000 put options. April 4.5 calls, which are now at-the-money, are the most actives. Volume is approaching 40,000. May 5, September 5, and September 5.5 calls are seeing active trading as well. Some investors might be taking positions in anticipation of earnings, which are scheduled for April 18. Citi will also initiate a one-for-ten reverse split on May 6.
 
Bearish Flow
 
Put volume is picking up in tax preparation company H&R Block (HRB) today. Shares have been performing well lately HRB is up 65 cents to $17.39 today and has now rallied 46 percent year-to-date. Meanwhile, in options action, 22,000 puts and 5,200 calls have traded in the name so far. The action includes a spread in the January 2012 puts, in which the investor bought 10,000 January 15 puts and sold 10,000 January 10 puts. They paid $1.09 for the spread and might be looking for the stock to reverse some of its recent gains, as the max pay-out happens if the stock falls to $10 per share through January 2012. A shareholder might have initiated the trade as a hedge.
 
SPDR Technology (XLK), which is an exchange-traded fund that holds all of the information technology names from the S&P 500, is up 4 cents to $26.10 and one investor apparently sells the XLK January 26 straddle at $3.72, 10000X. That is, they sold 10,000 January 26 puts at $1.88 apiece and sold 10,000 January 26 calls at $1.84 per contract. If so, it's not necessarily a bullish or bearish play. Rather, it's a bet that shares will hold around $26 through January 2012.
 
Implied Volatility Movers
 
CBOE Volatility Index (.VIX) is down 1.02 to 16.72 and returning to levels not seen on February 18, when the S&P 500 rallied to 52-week highs. The S&P 500 then tumbled from February 22 through March 16, but has been rallying since mid-March and is now within striking distance of those 52-week highs set in February. Meanwhile, the volatility index has plummeted 48 percent from the peak levels of 31.28 seen on March 16. The decline in the VIX, and the rally in the S&P 500, reflect the dramatic change in sentiment seen on Wall Street in just two and a half weeks.
 
Unusual Volume
 
NYSE Euronext (NYX) options volume is running 5X the (22-day) average, with 109,000 contracts traded and call volume accounting for about 83 percent of trades.
 
F5 Networks (FFIV) options volume is 2X the average daily, with 48,000 contracts traded and call volume representing for 60 percent of the activity.
 
Wynn Resorts (WYNN) options volume is running 2.5X the average daily, with 34,000 contracts traded and call volume accounting for 72 percent of the activity.
 
Increasing options activity is also being seen in Nabor's Industries (NBR), the Limited (LTD), and SRA International (SRX)
Posted in Commentary, Currencies, Earnings, Options, Stocks, Watchlist