Mid-day Flow Summary
Marvell Technology (MRVL)
Options on semiconductor producer Marvell Technology are trading triple their normal volume today as the stock is up nearly 3% on a Lehman analyst upgrade. A large diagonal time-spread of 22,500 contracts has provided nearly half today’s volume. The Jan-08 17.5 – Jan-09 25 Call spread traded for a net price of $1.05 with prices suggesting the initiator sold the Jan-08 options for their higher implied volatility.
The remainder of MRVL option flow is characterized by consistent option sellers and general downward pressure on implied volatilities. This suggests that market participants believe the worst may be over in terms of Marvell’s backdated options woes.
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Micron Technology (MU)
Also in the semiconductor space, Micron July 10 Puts are the most active among single-stock options today. In what appears to be a closing trade, 40,000 July 10 Puts were bought on the ARCA exchange for $0.20, against a sale of 6800 July 12.5 Puts for $0.95. As the stock is trading near $11.32, this allows the buyer to close their large downside risk position while controlling the expense through the sale of higher strike puts. The ideal payoff results from a rally in the stock towards 12.50.
Other significant open interest in MU is 53,542 upside Jan-08 20 Calls. These calls were sold to create an opening position in February of this year. Combined with today’s trading, it suggests that traders are positioned for reduced volatility with the stock hovering in the $12-$20 range for the rest of the year.
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About Henry Schwartz
Henry Schwartz has traded derivatives on US and European exchanges for nearly 20 years. His experience includes market-making and institutional trading at the Hull Group, Salomon Brothers, Bear Stearns and most recently Banc of America Securities, where he led the electronic market-making project coincident with the launch of the ISE. His current work involves real-time stream analysis of options market activity for a number of leading institutional sell-side firms.
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