Mid-day Flow Summary
Micron
Options on Semiconductor stocks were particularly active this morning following yesterday’s Micron (MU) earnings report. With the stock trading near $11.82 (down $0.37) 8,900 of the July 13 Puts were sold in a trade tied to stock on the NYSE-Arca exchange. Trading options with the hedge (‘tied’) helps to minimizes immediate delta impact and suggests the motivation is volatility based rather than directional. Realized volatility in MU has been near 24% over the past few months while at-the-money implieds are currently priced near 30%.
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INTC
Intel (INTC) was also busy, on pace so far to execute twice their average daily volume. 45,000 contracts traded so far, with the activity dominated by Jan-08 risk reversals (trading an out-of-money call against an out-of-money put). Jan-08 17.5 Puts have traded nearly 12,000 on the day, seller initiated, against buying of Jan-08 20 and 22.5 Calls. With INTC near $19.50 today (and earnings in 2 weeks) this trade will perform well if the stock rallies.
Consol
Consol Energy (CNX) saw an early burst of activity this morning coincident with a run from the $42 range to just over $43. 16,500 May 45 calls traded at $1.30 on the ISE, following a sale of 13,350 April 40 Calls at $2.70 several minutes earlier. With open interest of 23,869 in the April 40s, and just 429 contracts in May 45s, this looks like a diagonal roll of a long-call position. Considering the $10 rise in the stock since January, and the trade history of the April 40 Calls (many were bought in March for $0.55), rolling this position up and out takes some money off the table while suggesting a view of continued strength in the stock.
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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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