Stocks and Options in Focus Today, TGT, XLF, Retail baby …

 

This Morning's Bullish Trading
 
Target (TGT) adds 81 cents to $48.36 and today's options volume in the retailer is 11,000 calls and 5,065 puts through midday. July 49 calls, which are 1.3 percent out-of-the-money and expire in 9 days, are the most actives. In addition, of the 4,050 contracts traded, two-thirds have traded at the asking price. Increasing interest at the ask seems driven by call buyers. July 47 and 50 calls are busy as well. Bullish trading in Target might be a play on June same store sales numbers. Many individual retailers release their results Thursday morning.
 
SPDR Financials (XLF) loses a dime to $15.39 and one strategist bought a September 16 – 17 call spread on the exchange-traded fund at 23 cents, 24000X. That is, they bought 24,000 September 16 calls at 28 cents and sold 24,000 September 17 calls at a nickel. The spread looks like a bullish play on the financial sector that makes its best profits if XLF rallies to $17 or more through the September expiration, which represents at 10.5 percent gain over the next 72 days. SPDR Financials is one of nine Select Sector Funds that collectively hold the S&P 500 components. XLF holds all of the financial-related names.
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This Morning's Bearish Trading
 
Xerox (XRX) adds 6 cents to $10.63 and options volume is running 2.5X the average daily, apparently being driven by in-the-money call writers. The top trade is 6,993 January 2013 calls at the 10 line, traded on the $1.75 bid, which looks like a liquidating sale. 11,110 contracts have traded against 28,350 in open interest. July and January 10 calls are also seeing volume on the bid. $10 strike call options on Xerox are 63 cents in-the-money and some investors are possibly closing positions after a 13 percent gain in XRX shares since June 10. That is, they might see limited upside after the run higher and are closing out bullish positions.
 
Intel (INTC) adds 33 cents to $22.77 and options on the chipmaker are actively traded today. Volume is 55,000 calls and 37,000 puts through midday. The top trade is a strangle, in which the investor sold 15,000 July 22 puts at 10 cents and sold 15,000 July 23 calls at 10 cents. Therefore, they collected 23 cents per July 22 – 23 strangle. It's not necessarily a bullish or bearish play. Rather, it seems to be a bet that shares will hold between $22 and $23 through the expiration, which is in nine days.
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Volume Signals
 
EMC options volume is running 2.5X the (22-day) average, with 55,000 contracts traded and put activity accounting for 88 percent of the volume.
 
Accenture (ACN) options volume is 9X the average daily, with 51,000 contracts traded and put volume representing 92 percent of the activity.
 
General Mills (GIS) options volume is running 4.5X the average daily, with 24,000 contracts traded and call volume representing 96 percent of the total volume.
 
Increasing options activity is also being seen in Lowe's (LOW), Xerox (XRX), and Blackstone Group (BX).
 
Volatility Alerts
 
Implied volatility in Zagg Inc (ZAGG) is elevated amid active trading in options on the retailer. Shares are under pressure, down 91 cents to $12.82. Options volume in ZAGG is 14,000 calls and 13,000 puts. Typical volume through midday is about 4,500 contracts, according to Trade Alert. Meanwhile, implied volatility in Zagg options is rallying and elevated, up 16 percent to 133, as some investors appear to be bracing for a big move in shares in the days/weeks ahead.
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