Options Flow Summary: General Sentiment, Analog Devices (ADI), Marvell Technology (MRVL) & Regions Financial Corp (RF)
General Sentiment
There has been a moderate recovery in the markets today. The broad averages are off their highs but still up more than Ω% at mid-afternoon. In addition, we have seen the Dow Industrials holding onto a 120 point gain.
The CBOE VIX is down to 27.37 after yesterdays close near 29. This suggests that some traders view this recent "official 10% correction" as a healthy venting of speculative froth.
Analog Devices (ADI) and Marvell Technology (MRVL)
Earnings are due post-close today for both semiconductor names. ADI is currently trading up more than 2% to $31.11 with normal equity volume. By way of contrast, options volume is approaching five times the average level with a particular focus on upside calls.
More than 3,000 December 30 calls have traded so far today with 87% of the flow taking place on the offer. The implied volatility on that strike rose from 46% to 50% as buyers used multi-market sweeps to maximize available liquidity.
ADI is currently off the $40 highs that were set earlier this year. The buyer is paying nearly $2 for most of the 30 calls and would need a 3.25% spike on earnings to break even.
Marvell is also trading up on the day, with more than 130,000 contracts changing hands. The flow indicates considerable two-way trading in the December 17.5 calls, an option that is currently $1.20 out-of-the-money.
Noontime buyers were seen paying nearly $.60 for more than 8,000 of these calls. Several hours later, with the stock a bit lower, sellers dumped the same option 8000 times for $.50. This may may have been a quick stop-out for a buyer that was looking for an earnings bounce tonight.
Regions Financial Corp (RF)
Many financials are catching a bounce today on Citigroup's news, with the benchmark XLF ETF up 1.7% nearing the close. RF options are trading very actively today, with volume pushing five times normal levels and a heavy bearish bias to the flow.
The stock is up more than 6% to $24.62 so far today. In addition, more than 7,700 of the Jan-08 25 puts have traded on the day. The bulk of this activity took place at prices around $2.70 with buyers leading the flow.
An analyst upgrade of RF is driving most of this volume. However, traders appear to be selling into the rally and positioning for potential downside in the stock over the coming months.
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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