Mid-day Flow Summary: General Sentiment, Crocs Inc (CROX) & Boyd Gaming (BYD)
General Sentiment
The market is very choppy in the face of Citigroupís news along with analyst downgrades in a number of financials. After an early start down 1%, the broad averages have rallied by mid-morning, with Dow Industrials currently down 32 points and benchmark S&P 500 futures down 8 points. The rise of the CBOE VIX to 24 shows there is an increased level of fear as traders worry about further financial sector woes.
Crocs Inc (CROX)
Highly volatile apparel maker Crocs sold off from $75 to $48 after last weekís earnings release showed surprising levels of unsold inventory and receivables. Todayís trading is running at 6 times the normal pace of 39,000 contracts, as the stock is off another 7% to $44. Options trading shows a bearish bias as flow is dominated by call sellers hitting November 45, 50, and 55 strikes.
The largest trade was a buy of 1,500 March-08 35 puts for $3.60, executed as a multi-market sweep when the stock was near $45.73. The stock spiked briefly at 10:52 ET on takeover rumors but has since returned to lows. At-the-money implied volatility is currently in the 85% range which is down from last weekís 100% levels. This suggests 5+% daily swings are to be expected.
Boyd Gaming (BYD)
We are seeing very one-sided volume in this gaming stock today, with 9 times the normal daily option volume trading by mid-morning. The stock is up 3% on takeover chatter, to a current level that is close to $42.00.
Virtually all of the trading involves call buyers, with a special focus on the November 45 strike calls. This option has traded nearly 6,000 on the day, with 82% of the flow on the offer-side. As a result, implied volatility on the strike has spiked from the 44% range to the 53% range.
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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