Options Flow Summary and Unusual Activity Alert: Google Inc (GOOG) & Costco Wholesale Corp (COST)
General Sentiment
Markets continue to climb, with broad averages up nearly 1% in moderate trading. The CBOE Vix is down another point to 22.01 and call trading leads puts slightly in mixed activity.
Google Inc (GOOG) $461.29 -5.17%
This stock is getting pounded on disappointing search revenue metrics. It is currently down nearly $23 on heavy volume but recovering from lows near $447 before noon. The option volume leads the single stock space, with nearly 200,000 contracts trading, or double the typical level for Google.
Order flow appears to indicate that traders are looking for a bounce. Buyers in the March 480 and 500 calls are dominating the action One well-timed sweep order lifted nearly 1,000 March 500 calls for $4.30 when the stock was near $452 at midday. While the buyer timed the trade well, a compression of implied volatility coincident with the rally has eroded much of the gains. Those calls are quoted around $5.30 at this time.
Costco Wholesale Corp (COST) $67.11 +2.26%
We are seeing very bullish option activity in Costco today, with aggressive put sellers hitting March and April out-of-the-money puts this afternoon. Just after 3pm today, a multi-market sweep order was used to sell a total of 5,000 April 62.5 puts for $1.20 on the ISE, PHLX and CBOE simultaneously. Earlier today a seller hit nearly 1,500 March 65 puts for $1.41 in the same manner.
ATM implied volatility in Costco is currently near 30%. This seller may be attempting to capitalize on a general decrease in retail sector premium levels as the perceived risk of economic turbulence wanes.
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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