Options Flow Summary: General Sentiment, VIX, Crocs Inc. (CROX) & Intel (INTC)
General Sentiment
There is solid options volume today, although that is to be expected with expiration only a few days away. The broad averages are lower today on disappointing earnings and a few bearish credit comments.
The CBOE VIX is nearing 20 as traders adjust their premium expectations to incorporate slightly more volatility toward the end of the year. Calls outnumbered puts overall today, with generally two-sided trading and a slightly bullish bias.
Intel (INTC)
Intel calls were very active in small-lot trading yesterday, with a total of nearly 40,000 October 25 calls changing hands over the course of the day. Today, with earnings looming on the horizon, the stock is down $.29 to $25.50. The options are again very active with 250,000 contracts on the tape by 2:30 ET. That is four times the average daily volume level.
In sharp contrast to yesterday, todayís flow is decidedly bearish. There are consistent put buyers at the October 25 strike and aggressive call sellers at the October 27.5 strike. Volume in each of these contracts has totaled nearly 40,000 contracts, an impressive total under any circumstances.
It is foreseeable that some of today's volume may be driven by yesterday's October 25 call purchases. Owners of these options may be liquidating some of yesterdayís acquisitions because nearly 40,000 of these calls have traded with prices dropping from $1.16 to $.95 as the stock has retreated.
Crocs Inc (CROX)
We saw a significant amount of bullish options flow in CROX yesterday. The stock is down nearly 1% today, trading near the $69.66 level. Open interest changes from the previous session's trading confirm that yesterday's call buyers and put sellers were opening new positions.
The OCC's account breakdown for CROX shows that most of yesterday's volume consisted of customer accounts trading against market-maker accounts. Broker-dealer (a.k.a. firm) accounts primarily stayed out of the fray. This indicates that there was a healthy percentage of retail order flow in the mix along with a dearth of institutional crossing activity.
Despite the heavy volume yesterday, there was surprisingly little motion in CROX implied volatility levels. CROX November at-the-money volatility is currently trading near the 79% level. In addition, the longer-dated Jan-09 options have an implied volatility near the 58% level.
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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