Chevron Texaco (CVX) loses 29 cents to $83.65 and a noteworthy trade this morning is a Jan 72.5 - 80 (2X1) put ratio spread, bought at 37 cents, 3500X on CBOE. It might have been initiated as a hedge after a 15.2 percent rally in the share price since late-August. The oil giant is due to release earnings, Oct 29, before market.
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CBOE Volatility Index (.VIX) $18.97 -8.40%CBOE Volatility Index (.VIX) is down 1.72 to 18.99, session lows, and dipping below 19 for the first time since late-April. The decline in the volatility index comes amid very quiet trading Monday due, in part, to the Columbus Day holiday and the absence of any government data. The S&P 500 has traded in a narrow 4.4 point range. Investors are also looking to the earnings-reporting season. Several Dow components (GE, INTC, JPM) release this week, but the floodgate doesn't really open until next week. Expectations seem to be for steady market action during that time, which sometimes happens due to mixed trading as reports are released. Companies with good results see shares move higher, but those that miss see shares fall. Net result is mixed trading and low volatility for the S&P 500. However, some investors appear to be taking a contrarian view, as 133K calls and 74K puts traded on the volatility index so far. Top trade is Jan 32.5 - 40 call (1X2) backspread, bought at 25 cents, 7000X.
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Xerox Corp (XRX) $11.14 +1.74%Noteworthy trade in Xerox (XRX). Shares added 18 cents to $11.13 and the April 9 - 12 strangle is sold at $1.13, 40000X. This is a new position and seems to be a bet that shares will hold between $9 and $12 through the April 2011 options expiration.
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TIVO shares lost 2 cents to $10.28 and 12K calls traded in the name on renewed speculation of a settlement with Dish Network (DISH), yet again. It's unsubstantiated, but it might be the motivation behind the active trading in TIVO Oct and Nov 9, 10 and 11 calls today. The top trades of the day are part of a longer-term spread, however, after an investor bought the May $12 - Jan12 $22.5 call spread at $1.65, 1276X on ISE. The spread traded 2600X total (looks opening) and seems to be a bet that shares will move beyond $12 by the May expiration, but not beyond $22.5 by January 2012.
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Halliburton Co (HAL) $34.62 +2.97%Halliburton (HAL) is rallying, up $1.10 to $34.72, and 8100 calls traded in the oil driller so far. The call volume represents 3X the expected and compares to 2,540 puts. Nov 34 calls are the most actives. 3,390 traded (89 percent Ask). Similar action seen in Oct 35 and Jan 40 calls. Implied volatility is off 2.5 percent to 36.5 and the bullish trading comes ahead of an Oct 18, before market, earnings release. No news on the ticker today. Crude oil added $1.21 to $82.88 a barrel.
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Biodel Inc (BIOD) $4.45 -1.11%Biodel (BIOD), a Danbury, CT biopharmaceutical company, lost 27 cents to $4.50 and options volume rose to 7X the average daily yesterday after one investor initiated a Mar 2.5 - 7.5 bearish risk-reversal at 35 cents, 10000X. They bought puts, sold calls to open a new positions. Implied volatility in BIOD is elevated at 225 percent, as investors await an Oct 30 PDUFA date for the company's Linjeta, a treatment for diabetes. The company presented data on the drug at a conference in Europe on 9/20. Shares moved up on the news, but are down 20.8 percent since that time. Yesterday's risk-reversal might be a shareholder initiating a "collar" or hedge on concerns about potential volatility around the PDUFA date.
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Potash Corp (POT) $140.95 -0.30%Potash (POT) loses 59 cents to $140.79 and options are busy today after Globe and Mail reported that the company's CEO called BHP's hostile $130 per share bid for the conpany as a "non-starter." Potash's Chief Executive said the value of his company far exceeds $170 per share. 67K calls and 43K puts traded on Potash so far. One noteworthy trade is a Nov 130 - 140 strangle sold at $7, 5000X. Another investor paid $2.50 for a Dec 140 - 150 - 160 call butterfly spread, 1400X. A block of 10000 Nov 145 calls traded at $2.85 and was possibly initiated by a buyer. It was tied to shares at $140.05 on a 36 delta. Finally, a block of 7716 Dec 155 calls was sold at $1.85. Implied volatility in POT is down about 4 percent to 25.5.
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Financial Select Sector (XLF) $14.66 -0.38%Financials Select Sector Fund (XLF) loses three cents to $14.70 and a noteworthy options trade today is a buyer of 29,000 March 16 calls at 60 cents each. Looks like an opening trade. XLF implied volaitility is up 4 percent to 26.5, as the focus begins to shift to the earnings reports. No significant reports are slated for the remainder of this week. JPM is the only big name reporting next week (10/13). The floodgate opens thereafter. C and ZION on 10/18, BAC, BK, GS, STT on 10/19, CMA, MTB, USB, WFC on 10/20, among others.
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Citigroup Inc (C) $4.17 +1.83%Citi (C) options are seeing brisk trading and implied volatility is moving higher Thursday morning. Shares are up 7 cents to $4.17 after Nomura initiated the bank with a Buy rating (as well as Buy ratings on JPM, GS, BEN, BLK and IVZ). 95K calls and 62K puts traded on Citi in the first hour. The top trade is a buyer of 40K Nov 4 puts at 12 cents each on CBOE. It was tied to stock, delta neutral, according to a source on the floor. A block of 10K Oct 4 puts traded on the 3 cent ask price. On the other side of the options chain, today's flow includes a sweep of 15000 Oct 4 calls on the 19-cent ask price, a sweep of 5155 Mar 4 calls at the 50 cent ask price, a sweep of 5084 Jan 4 calls at the 39-cent ask price and a sweep of 4463 Jan12 4 calls at 89 cents. Overall volume is running more than double the expected for the first hour and implied volatility is up nearly 10 percent to 33. Citi is due to release earnings Oct 18, before market.
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Royal Caribbean Cruises Ltd (RCL) $33.08 +0.36%Royal Caribbean shares are up 10c to $33.10 and option volume is 2x the daily average driven by notably put selling. Most active strike is the November $30 puts which has seen two blocks of 2,370 and 2,010 contracts, now total of 6,000 traded, in what looks like opening sales between 96c-98c; prior open interest in the strike was just 150 contracts. Shares of the cruise ship operator have gained some 30% in the past six weeks and have now poked through resistance $33 level. This may a play that recent trends indicating a positive travel season will keep the shares afloat in the coming month.
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