Monday Options Recap

Sentiment

The major averages are holding gains with help from analyst upgrades Monday. Alcoa (AA) gained 8 percent and is the best gainer in the Dow Jones Industrial Average after Morgan Stanley upgraded the stock to Overweight. Intel (INTC) is helping both the Dow and the NASDAQ after Barclays raised its rating to Overweight.

With no economic data on tap, and light trading due to the upcoming holidays, investors didn't have much other news to work with Monday. Crude oil lost $1.07 to $73.35 and gold suffered another setback, down $18.80 to $1092.70 an ounce.

With about forty minutes left to trade, the Dow Jones Industrial Average is up 82 points and the NASDAQ has added 23. The CBOE Volatility Index (.VIX) is back at the lower end of its recent range, down 1.20 to 20.48. Trading in the options market is running about the usual, with approximately 8.1 million puts and 4.7 million calls traded so far (a ratio of .58, compared to a 22-day average of .75.)

Bullish Flow

Aetna (AET) is up $1.46 to $33.97 after a healthcare bill that appears set to clear the Senate with 60 votes doesn't include a public healthcare plan option. While the House version of the bill does include one, reports are that a final bill is more likely to look like the Senate version. Consequently, some of the private insurers are trading higher and, in AET options, one player sold 5000 Jan 33 calls to buy 10K Jan 35 calls and this 1X2 call spread might be rolling up in strikes — doubling up on a winning trade. Separately, another investor bought 5,000 Jan $40 calls at a dime on ISE, which is an opening buyer, according to ISEE. 36K calls and 2,330 puts traded total, or about 4X the average daily.

Alcoa (AA) options are buzzing with activity, as shares of the metals company rally to new 52-week highs following a Morgan Stanley upgrade. AA is up 8.2 percent to $15.77 and easily the best gainer in the Dow Jones Industrial Average Monday. Options volume hit 3X the average daily. Of the 109K contracts traded, 75 percent hit on the call side of the options chain. The action includes 12.2K Jan 15 calls on the bid, for $1.30 apiece, which coincided with 930K shares at $15.81, and appears to be a buy-write. 30.7K contracts now traded. Jan 14, 16, and 17.5 calls are among the most actives as well.

Bearish Flow

Bearish flow was detected in Milwaukee-based mortgage insurance company MGIC Investment (MTG). Shares are up 8 cents to $5.12 and 2,900 puts traded, or 3X the recent averge daily volume. Jan10 $5 puts are the most actives, with 2,056 traded and 100 percent hitting ask-side. Mar $5 puts are seeing some interest as well.

Implied Volatility Movers

Brighman Exploration (BEXP) has been grinding higher, notched a new 52-week high, and was recently up 45 cents to $13.80. Options volume in the Austin, TX oil and gas exploration company is 2X the average daily, with Jan 15 calls leading the flow. 4056 traded (about half ask-side) vs. 577 in open interest. Looks like call buyers surfaced around 14:30, paying 40 cents, and the action continued for the next thirty minutes. No news on the stock today. Implied volatility (Jan 15s) up 2.4 percent to 56.4.

Unusual Volume Movers

Ford Motor (F) is seeing 2X average daily trading volume, with 144,000 contracts traded and put volume representing 64 percent of today's activity.

Micron Technology (MU) is seeing 3X average trading volume, with 74,000 contracts traded and calls representing 74 percent of today's trading activity.

NRG Energy (NRG) is seeing 10X normal trading volume. 71,000 contracts have traded, with call options representing about 89 percent of the flow.

Unusual volume (two times or more than normal average volume) is also being seen in Teva Pharmaceuticals (TEVA), Amgen (AMGN), and Fannie Mae (FNM).