Options Flow Summary: General Sentiment, Ford (F), General Motors (GM) & Endo Pharmaceuticals Holdings Inc. (ENDP)
General Sentiment
It's a very active day in the options markets. Volume is on pace for nearly 15 million contracts. That is 50% above recent average volume levels.
The broad market averages touched record highs today, helped by strong auto stocks, oil prices, and retail numbers. Unfortunately, a quick reversal later this afternoon sent most sectors lower. By midafternoon, there were 6 million calls and 4 million puts on the tape with a generally bullish sentiment.
Autos (GM, F)
GM and Ford are leading this sector in price action and option activity. Both are up nearly 7% on the heels of the second successful UAW deal.
Nearly 300,000 GM contracts had changed hands by 2pm with a focus on the November 40 and 42.5 calls.
Several large spreads traded on the Amex just after noon as a buyer rolled October in-the-money calls out to November out-of-the money calls. This trade went up 15,000 times for a credit of $1.40. It suggests a significant bet that the stock will continue to do well throughout the fall.
Ford saw a similar upside calendar trade, with nearly 24,000 November- December calendar spreads trading on the 9 strike. The stock is currently near $8.69. This trade will result in a maximum gain if the stock sees a late year rally above that strike.
Endo Pharmaceuticals Holdings Inc. (ENDP)
There is unusual activity in this drug stock today, with trading concentrated in the Nov 07 30 calls. Most of this trading is offer-side and will create significant new open interest on the strike.
A total of 2,500 of these contracts have changed hands today. That is 11 times the average daily volume of this normally quiet name. Such significant bullish activity is interesting given that the stock is trading near a one year low of $27.93.
ENDP recently had one of their pain medication patents challenged. In addition, earnings are due to be released next week on October 18th.
(Ellen Spiro contributed to this story)
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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