Thursday Options Recap

Sentiment

Stock market averages are holding gains on hopes for the Eurozone and upbeat economic data Thursday. Germany’s DAX rallied nearly 2 percent and erased most of the losses from the day before after Italian bond yields ticked lower following a successful auction of bonds. Meanwhile, domestic economic data included a report on Pending Home Sales, which shot up 7.3 percent in November and 6.6 percent more than expected. The Chicago PMI held steady at 62.5 in December. A decline to 60.1 was expected. But Jobless Claims rose 15,000 last week and 13,000 more than expected. Overall, the news flow was mostly positive, however, and the Dow Jones Industrial Average has recovered 115 of the 140 points lost the day before. The NASDAQ tacked on 20. CBOE Volatility Index (.VIX) edged down .59 to 22.93 amid light volume in the options market. 4 million calls and 3.3 million puts traded across the exchanges thus far.

Bullish Flow

James River Coal (JRCC) adds 24 cents to $6.53 and options action on the coal producer is heating up today. June 7 calls, which are 7.2 percent out-of-the-money, are the most actives. The flow includes two sweeps of 1350 contracts (2700 total) for $1.275 when the market was $1.15 to $1.30. Volume is now 5140 against just 12 contracts in open interest. June $10, June $12, May 8 and May 10 calls on JRCC are seeing interest as well and implied volatility is up 8.5 percent to 84. Some investors might be expecting the stock to rebound during the first half of 2012 after a dismal performance in 2011. Shares are off 74.3 percent year-to-date.

A lot of focus remains on the mining names amid volatility in the yellow metal today. Gold fell to a low of $1523 this morning, but is $20 off those lows. Still, the precious metal has lost $21 to $15.43 and today’s slide adds to a drop of nearly $40 the day before (capitulation?). Meanwhile, Kinross Gold (KGC) is up a nickel to $11.19 and options on the miner are actively traded Thursday. The top trade is a 2000-lot of Jan $10 calls at the $1.24 asking price on ISE, where data is reporting an opening buyer. 3500 traded total. Jan $10 puts are the most actives in Kinross and have traded mostly in smaller lots on the bid. The top trade is 269 at 14 cents. 4,954 traded and is possibly closing activity. Jan 12.5, Jan 15, and May 14 calls on KGC are actively traded and implied volatility is steady around 44, as some bullish traders might be bottom-fishing in the name after a 36 percent slide in shares since August.

Bearish Flow

Lowe’s (LOW) is up 32 cents to $25.38 today after announcing plans to buy online home improvement retailer ATG Stores. The stock is now up 31.2 percent since September. Some investors might be looking to hedge the recent gains, as a 6980-lot of Feb 25 puts traded on LOW today for 93 cents when the market was 91 to 93 cents. 10,110 now traded against 880 in open interest. The company last reported earnings on Nov 14 and will possibly report again before the Feb 18, 2012 expiration. The company reaffirmed its full year earnings and revenue outlook on 12/6.

Implied volatility Mover

While overall option volume is very light, TIVO is seeing unusually heavy activity, with 12000 contracts trading, triple the typical daily volume for the name. Puts dominate the flow with a closing customer buyer of Jan 11 puts for $2.34 early in the day when shares were near 8.85. Flow history on these suggests the buyer likely put on the position earlier this year near $2 when shares were around $9. Meanwhile, implied volatility in the options on the stock is among the big movers today. IV in TIVO is up 31 percent to 84! Shares have ranged from the low $7 level in Aug to a few brief peaks near $11. Earnings expected early-March.