Mid-day Flow Summary: General Sentiment, AAPL & ADBE
General Sentiment
The market is lower today with the broad averages down nearly 1% and the CBOE VIX is up 1.84 to 24.66. Volume is on track to match the recent daily average levels of 12 million contracts.
Apple Inc (AAPL)
Apple continues to dominate the single stock space with over 200,000 contracts trading by noon today. In contrast to yesterdayís general upside call-buying, todayís flow is more mixed in nature as participants position for movement. This is in response to news from the media event taking place on the west coast today.
Most active contract in Apple is September 145 calls, currently $1 out-of-the-money as the stock trades near $144. More than 22,000 of these calls have traded today at prices in the $6 range, with slightly more sellers than buyers of the contract. Yesterday we saw close to 40,000 of these calls change hands, with early buyers paying $3.20 and the contract closing near $5.60 as the stock climbed. Interestingly, despite this massive volume total, open interest in the contract moved by only 4518 contracts, showing significant ëscalpingí over the course of the day.
Adobe Systems (ADBE)
Adobe is trading nearly triple its usual pace, with 12,000 contracts on the tape and October 45 calls the primary focus of the day. Nearly 10,000 of these calls have traded, including an aggressive multi-market order selling 6420 contracts for $1.40 just before noon. The stock is trading at $43.78 and the existing open interest of just 8757 contracts suggests this to be an opening transaction.
Implied volatility of 30% for these options may seem rich versus historical realized levels near 20. However, with earnings expected just a few days prior to expiration, event risk is significant. This seller appears to be comfortable that upside is limited in the name for the short term.
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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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