Options Flow Summary: General Sentiment, Research In Motion (RIMM) & EMC Corp. (EMC)
General Sentiment
There has been a solid rally in US markets today based on strong employment numbers for September and August. As recession fears recede, the broad averages are up well over 1% with many new all-time highs.
The CBOE VIX sentiment index confirms this general calming trend in the marketplace. It is now trading at 16.5, the lowest range for the VIX since July. By late afternoon, 8.2 million contracts have changed hands with calls outnumbering puts 4 to 3 and a generally bullish bias.
IT Hardware Sector (RIMM, EMC)
This is normally one of the busiest sectors in the market with recent average daily options volume exceeding 800,000 contracts. Volume in this sector has already passed 1.2 million contracts today as traders react to RIMMís positive earnings and establish positions in several other names.
Close to half a million RIMM options have traded today, with the stock currently up nearly 13% to $113.46. Some traders appear to be taking profits on calls made from stock gains earlier this week. Many of these traders are now positioning for additional upside movement with the currently at-the-money 115 calls.
Close to 40,000 Oct 100 calls traded yesterday as well. Most of this activity was buyer initiated at prices near $7. These same calls are being sold today for close to double that price. Buyers have surfaced in October 115 calls as well, with nearly 40,000 changing hands today. Most of these trades took place in the $4.00 price range.
EMC options are also active for the second day in a row with consistent premium buying suggesting that the stock may be in for an active future. While the stock is trading relatively flat today, buyers have used multi-market sweep algorithms to buy more than 7,000 April 25 calls. Not surprisingly, this buying activity has caused implied volatility to lift several points on the strike. We also saw active buying to open new positions in the November 22.5 calls.
Posted By: Trade Alert
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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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