Friday Options Recap

Stock market averages fell Friday on a mixed unemployment report and amid ongoing uncertainty about debt problems in Europe. Investors are waiting to hear if Greece stands ready to implement tough austerity measures to avoid a messy debt default. The uncertainty sent stocks lower across the Eurozone, with a 2.7 percent loss in Germany’s DAX pacing the slide. The domestic economic news included monthly jobs data, which showed an 80,000 increase in October payrolls. The number fell 5000 short of expectations, but the report held some bright spots. September figures were revised up and the rate of unemployed fell to 9 percent from 9.1 percent (vs. expectations of 9.1 percent). Yet, events in Europe continue to weigh heavily on Wall Street – most notably in the financials. BofA (BAC) is the Dow’s biggest loser and is down 5.7 percent. The industrial average is off 98 points and the tech-heavy NASDAQ lost 15.2. The decline has been orderly so far and CBOE Volatility Index (.VIX) is up just .32 points to 30.82. Overall trading volume is light, with 6.3 million calls and 6.3 million puts traded across the exchanges.

Bullish Flow

Yahoo (YHOO) loses 48 cents to $15 and a Dec 12 – 14 bearish risk-reversal trades on the Internet company at $1.53, 16000X. Looks tied to 1.6 million shares at $15.03 and appears to be a new position. If so, the collar position would have a similar payoff as an in-the-money buy write, but includes OTM puts as a downside hedge. Another noteworthy trade in Yahoo today is a Jan 16 – 20 call spread, bought for 88 cents, 6800X and not tied to stock. A third player bought a Nov 17 – 20 (1X2) call ratio spread on Yahoo for 12 cents, 5000X and tied to stock at $14.95.

Dish Networks (DISH) loses 47 cents to $23.21 and recent trades on the stock include a Dec 21 – 25 risk-reversal for 20 cents 1300X on NYSE. The same combo traded 400X for 15 cents on ISE, where data indicate a customer bought calls, sold puts, to open a new position. Bullish trading in DISH comes ahead of earnings Monday morning.

Bearish Flow

Oracle (ORCL) loses 52 cents to $32.59 and a Jan 30 - 32 (3X2) put ratio backspread is sold on the stock at 4 cents, 14000X. The strategist sold 14,000 of the Jan 32s at $1.91 to buy 21000 Jan 30 puts for $1.26. While open interest in sufficient to cover in the 30s, this might be a new position as today's volume of 22,589 is easily a new volume record for the Jan 30 put on Oracle. The next highest volume is 3,292 traded on 6/17. Although down today, Oracle shares have performed well lately and have rallied 31.4 percent off the 52-week lows set 8/19. The put ratio backspread might be designed to hedge stock, as the 4-cent credit is kept if the position is held through the expiration and ORCL holds above $32, but better profits are possible if the stock tanks.

Implied Volatility Mover

Optimer Pharmaceuticals (OPTR) loses $1.57 to $13.07 after reporting a wider-than-expected third quarter loss. Early options trades on the biotech include a 5,000-contract block of Dec $12.5 puts, sold at 75 cents per contract and tied to 200K shares at $12.90. The position looks opening and to reflect expectations shares will hold above $12.5 (~4.3%) through the Dec expiration (42 days). Separately, a Dec 12.,5 – 15 put spread was apparently bought-to-open on OPTR for $1.80, 1000X. Meanwhile, implied volatility in the options on the stock is down 17 percent to 52.5.

Unusual Volume Movers

Bullish flow detected in Alpha Natural Resources (ANR), with 20493 calls trading, or 2x the recent average daily call volume in the name.

Bullish flow detected in Spectra Energy (SE), 5159 calls trading, or 5x the recent average daily call volume in the name.

Bullish flow detected in Quicksilver Resources (KWK), with 10887 calls trading, or 6x the recent average daily call volume in the name.

Unusual high options volume is also being seen in Jefferies (JEF), AMR (AMR), and Knight Trading (KCG).