Mid-day Flow Summary

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Cisco Systems Inc. (CSCO)
Cisco options are very active ahead of this afternoon’s scheduled earnings. More than 100,000 contracts have traded by 11:30am, well above the month’s average daily volume of 60,000.

The stock is trading up 1% to $28.08, and the majority of the option flow is being initiated by premium sellers trying to get ahead of a post-earnings implied volatility contraction. Directionally, the flow suggests a view of limited upside potential for the stock (it started April near 25.50), with 16,000 May 27.5 Calls on the tape in mixed two-way flow. However, there is significant selling in June 30 Calls where 23,000 have traded (63% on the bid).  

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AK Steel (AKS)
AKS has been the topic of deal-related chatter for some time. The stock has more than doubled this year to its current level of $34.50. Currently the stock is up 8% in very choppy trading, following a $9 gap after the close yesterday to $39.00. 

The largest option trade in the market this morning was a sale of 12,500 Jun 30 – 35 call spreads for $3.80 on the ISE, which suggests a view that the run up on deal speculation may be overdone. In a similar directional trade, 8000 Sept 30 puts were bought on the Amex for $1.35 in a trade creating new open interest. 
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