Friday Options Recap

Sentiment

Manic- depressive market action continues Friday. After sliding nearly 200-points Thursday, the Dow Jones Industrial Average followed European markets higher Friday morning and is up 188 points late in the session. Today’s see-saw trading was apparently motivated by an accord from EU officials that will set stricter rules on fiscal budgets to help stem the debt crisis. The domestic economic calendar included a surprise reading from the UofMichigan Sentiment Index, which rose to 67.7 in mid-December, from 64.1 in late-November and much better than the 65 that economists had expected. However, the market remains headline-driven and not data-driven. Consequently, the Dow is up along with European stock benchmarks and the tech-heavy NASDAQ gained 52. CBOE Volatility Index (.VIX) is down 3.62 points to 26.97. Trading in the options market was active early, but is slowing ahead of the weekend. 6.2 million calls and 6.1 million puts traded across the exchanges so far.

Bullish Flow

Fairchild Semiconductor (FCS) adds 12 cents to $12.79 and options volume on the stock is running 6X the daily average, driven by a morning sweep of 2,331 Dec 13 calls across multiple exchanges, for 30 cents when the market was 20 to 30 cents. 2,727 now traded against 299 in open interest. Sentiment data is consistent with an opening customer buyer. The contract is 1.6 percent OTM and expiring in one week. The market is now 25 to 35 cents.

Intel (INTC) adds 31 cents to $25.02 and recent trades on the chipmaker include a Dec 25 - Jan 27 call spread at 9 cents, 4620X on ISE. The spread has traded multiple times today and data from the ISE indicate an opening trade -- with a customer selling the Dec 25s to buy the Jan 27s. This diagonal spread is possibly a bet that INTC will hold around $25 or less through next week, but then recapture the $27 level through the Jan expiration (which is in 6 weeks).

Bearish Flow

Sprint (S) loses a penny to $2.43 and more than 35,000 Dec 2.5 puts traded on the stock today. 99 percent traded at the ask, including a 24600-contract block for 16 cents. The next biggest trade is a 1279-lot for 13 cents on ISE and a customer buying-to-close, according to data from the exchange. Indeed, with the contract now 6 cents in-the-money heading into the expiration, investors might be closing some of the open interest (40,980) rather than running the facing the chance of assignment on the contract next week.

NRG (NRG) adds 21 cents to $18.82 and options volume on the Princeton, NJ electric utility is running 38X the daily average, being driven by a buyer of 15,000 Jan 2014 $10 puts on the stock for $1 per contract. The put purchase appears to be a new position and was perhaps initiated to hedge stock over the next two years. The contract is 46.9 percent OTM and NRG has not traded for less than $10 since May 2004.

Implied Volatility Mover

Texas Instruments (TXN) trades down 55 cents to $29.37 and is seeing relative weakness after the chipmaker lowered its fourth quarter revenue forecast. Early options trades on the stock include a Jan 28 - 30 call spread, apparently bought for $1.07, 3500X, and possibly a position adjustment. Open interest is sufficient to cover in both contracts. The top trade is a 4343-lot of Dec 29 calls at 58 cents when the market was 57 to 59 cents and possibly an opening buyer looking for the stock to rebound before next week's expiration. However, Dec 30 puts are the most actives, with 6140 traded (64 percent Ask). Today's move left a gap on the stock chart and TXN has now suffered a two-day 4.6 percent decline, but implied volatility has eased 4.5 percent to 34 today now that the fourth quarter outlook has been updated.

Unusual Volume Movers

Bullish flow detected in Arena Pharmaceuticals (ARNA), with 3834 calls trading, or 3x the recent avg daily call volume in the name.

Bullish flow detected in JetBlue Airways (JBLU), with 10409 calls trading, or 6x the recent avg daily call volume in the name.

Bullish flow detected in ON Semiconductor (ONNN), with 7791 calls trading, or 4x the recent avg daily call volume in the name.

Increasing options volume is also being seen in LDK Solar (LDK), Potash (POT), and Career Education (CECO).