Mid-day Flow Summary: General Sentiment, Cisco Systems Inc (CSCO) & Crocs Inc (CROX)
General Sentiment
The markets are lower in the wake of yesterdayís dramatic selloff. Broad averages attempted an early rally, but reaction to Benankeís testimony before congress quickly erased gains. The CBOE VIX stands at 27.60 as traders continue to worry about the situation in financials and how this crisis may play out. Option volume is on pace for a possible record near 20 million contracts. Directional bias is bearish, with puts and calls trading nearly equal volumes.
Cisco Systems Inc (CSCO)
Last nightís earnings, while near expected levels, failed to impress investors. As a result, CSCO has sold off 8% to current levels near $30. The large-scale buyers of November 35 calls seen over the past week are suffering significant losses. Open interest peaked at more than 137,000 contracts and are currently trading near worthless.
Todayís option flow in CSCO generally mirrors the overall market, with general call selling and put buying dominating the activity. At mid-morning an aggressive sweep order was used to sell 3,100 Jan-08 27.5 calls for $3.90. This trade would benefit from weakness in the stock and/or a contraction of the current elevated implied volatility levels.
Crocs Inc (CROX)
Continuing the volatile slide which began last week, CROX is off another 15% to the $35 range as investors reevaluate projections of future growth. Options flow today is sharply bearish, with buyers lifting November 30 and 35 puts and driving implied volatilities even higher to 130% levels in the near term.
While pessimism seems to dominate, one buyer of nearly 1,000 Dec 50 calls entered the market just after noon, paying $1 for calls currently 30% out of the money. The stock has bounced off 1pm lows near $34.
Posted By: Trade Alert
"
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.
View Henry Schwartz's post archive >
