Mid-day Flow Summary: General Sentiment, CYPB, PHM, TOL & LEN
General Sentiment
Markets are slightly lower in mid-morning trading, with the CBOE VIX lifting slightly to a current level near 18.80. This is a significant bounce from the lows near 17 that were seen recently. Options volume is on pace for another busy day, with calls outpacing puts slightly but with a small directional bias.
Cypress Bioscience (CYPB)
We are seeing unusual volume in this biotech name. CYPB options flow is being dominated by premium buyers. The stock is currently trading up $.18 to $14.79 and buyers have been actively lifting offers in the November 15 puts. This has caused implied volatility in that strike to rise from 64% to nearly 78% today.
Out-of-the-money call sellers are also active today. Most of their activity is focused on January 09 25 calls and November 15 calls. This activity suggests that market participants are pessimistic regarding the firm despite a recent buy recommendation from Citibank.
Homebuilding Sector (PHM, TOL, LEN)
We have seen very strong performance in the homebuilding sector today with the sector benchmark XHB ETF up 4.81%. Options volume in this sector is on pace for triple the recent levels. The options flow is very bullish, with call buyers and put sellers building long positions in several names.
By mid-morning, the greatest activity has been seen in the 3,500 PHM October 15 calls, 3,000 LEN Jan 08 25 calls, and 2,000 KBH November 30 calls. All of these contracts traded in the form of aggressive multi-market sweeps.
In a similar vein, put sellers are pounding KBH Oct 25 puts, LEN Oct 22 puts, and CTX Oct 25 puts as chatter abounds that the worst of the credit crisis may be behind us.
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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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