Daily Stock Options Recap – September 22, 2010

Sentiment

Major averages have battled back from morning losses and are trading mixed late-Wednesday. It’s been a slow news day so far. With no economic news to guide the action, most of the early focus was on stock news. Adobe (ADBE) is losing serious market cap after missing on earnings, down 18.8 percent to $26.65. EBAY slid after offering uninspiring guidance for the third quarter and announcing the resignation of the head of its core auction business. Microsoft (MSFT) is down 2.7 percent and the biggest loser in the Dow Jones Industrial Average on news it will increase its dividend by 23 percent. However, Alcoa (AA) is up 5 percent and leading the Dow higher late in the day. The industrial average is now flat. The NASDAQ is down 15 points. With less than an hour to trade, the CBOE Volatility Index (.VIX) is up .12 to 22.47. Trading in the options market is active, with about 5.8 million calls and 5.3 million puts traded so far.

Bullish Flow

Clean Energy Fuels (CLNE) sees a morning spike on increasing volume and is now up 39 cents to $15.49 after Pittsburg Tribune Review published a story saying the Pennsylvania State House Republicans are driving an initiative to convert state vehicles to natural gas and also to build natural gas stations. The news seems to be fueling some action in the options pits as well. CLNE October 17 and 16 calls have traded 2678 and 1485X, respectively, and about two thirds trading at the offer. Looks like opening buyers dominating the flow and implied volatility is up 4 percent to 51. FSYS and WPRT saw positive reactions to the news as well.

Steve Smith notes today that: Baker Hughes (BHI), an oil and gas services firm, sees notable trade in the Jan. $34 puts /$46 calls as each trade 5,000 contracts on the ISE. According to ISEE data, the calls were bought-to-open, not the puts. So, this appears to be a bullish risk-reversal at a debit of about 16 cents. Shares are currently trading down 18 cents to $40.08. Next earnings due early November.

Bearish Flow

CIT Group (CIT) is off 22 cents to $39.25 and one strategist apparently sells 1,000 Jan 2012 puts at the 35 strike at $4.35 to buy 3,000 Jan 2013 puts at the 20 strike at $2.05. Looks like an opening 1X3 put ratio spread and possibly a bet that shares will hold above $35 through next year and then possibly see an uptick in volatility during 2012.

Implied Volatility Mover

Biogen Idec (BIIB) has seen a day of brisk trading and implied volatility is higher after US regulators backed Novartis’ MS drug Gilenya, which is expected to take market share from Biogen’s Tysabri. BIIB hit a low of $54.48 this morning and was recently down $3.15 to $55.08. Options volume is 13X the average daily, with most of the bigger trades surfacing early in morning trading. 17K puts and 7,050 calls traded. Some investors appear to be bracing for additional downside in the weeks ahead, as Oct 55 and 52 puts are the most actives and implied volatility is up 7 percent to 32.