Midday Flow Report: WaMu and Elan Show Activity

Tag : titanium block

Sentiment has improved noticeably in the options market middayTuesday. After rallying 1.32 points to 24.23 Monday, the CBOEVolatility Index (.VIX) is down 1.31 to 22.91 midday Tuesday andnow not much changed on the week. Meanwhile, approximately 3.8million call options and 3.2 million puts traded across the USoptions exchanges during the first half of Tuesday’s tradingsession.
Bullish Flow
Washingon Mutual ( WM ) long term options are active on spread trading. Shares edged down2 cents to $3.92 and much of this morning’s activity involvedJanuary 2010 calls with the 5 and 10 strikes. At 10:42 Easterntime, 20,000 of the 5s traded offerside for $2.00 a contract andthe same number of 10s bidside for 95 cents. The action appears tobe opening of a substantial bull call spread. If so, thisstrategist is betting on a rebound in WM and is paying $1.05 toenter the spread, with a potential payoff of $3.95 if the stockrallies up to $10.00 a share or beyond by January 2010 optionsexpiration.
Elan Corp. ( ELN ) is seeing action ahead of this afternoon's presentation about amidstage study data on its Alzeimer's disease treatmentbapineuzumab. The August 35 calls, August 40 calls, and August 25puts are the most actives. At approximately 9:45 Eastern time,10,000 of each traded on the PHLX. Sources on the exchange tellWhatsTrading.com that the action was by one player who bought the35/40 call spread and sold the same number of 25 puts. The tradewas also tied to a block of ELN shares, which suggests thestrategist in question was possibly taking on a substantial andbullish trade ahead of the news.
Titanium Metals ( TIE ) is seeing double its normal trading volume on call buying. Thestock jumped 55 cents to $11.20 on talk the company could be takenprivate. 7,700 TIE calls traded midday, compared to just 73 puts.The August 12.5 calls are the most actives, with 82 percent oftoday's volume trading offerside.
The Select Sector Consumer Discretionary Fund ( XLY ) is seeing bullish order flow on the heels of better-than-expectedconsumer confidence numbers. According to the Conference Board'sIndex, consumer confidence rose in July, to 51.9 from 51 the monthbefore. Economists were looking for a decline to 50.00. The strongnumbers helped ignite a rally in consumer discretionary stocks.
The XLY, which is an exchange traded fund that holds companies likeMcDonald’s ( MCD ), Home Depot ( HD ), and Time Warner ( TWX ), is up 62 cents to $28.38 and some players are looking for theshort-term strength to continue. As evidence, more than 16,000 ofthe August 29 calls trading. With 90 percent of that volume tradingofferside and open interest of just 2,288 contracts, the actionappears to be opening buy orders and therefore bullish trading inanticipation of further gains for the XLY in the short-term.
Bearish Flow
XL Capital ( XL ) is seeing bearish order flow after Moody’s said it wasreviewing the company for possible downgrade. XL is trading down$1.22 to $17.15 a share and August 17.5 calls are the most actives.4,630 contracts have traded, with 80 percent of today’svolume trading bidside. Meanwhile, 2,951 of the October 15s havetraded, with 85 percent trading offerside. Action is also pickingup in the October 20 and 12.5 put options. In short (pun!), callselling and put buying suggests that players remain bearish on XLeven after today’s 6.6 percent decline.
Today’s top trade in the ETF market was an order of 40,000PowerShares NASDAQ 100 ( QQQQ ) January 40 puts traded offerside, or $1.50 a contract, at 9:40Eastern time on the AMEX.
Implied Volatility Movers
Merrill Lynch ( MER ) implied volatility is easing despite ongoing volatility in theshare price. The stock hit a low of $22.00 a share early, itslowest levels in almost ten years, after the firm said it wasselling $30 billion in mortgage related securities and $8.5 billionin a stock offering. However, MER battled back to $23.58 midday andimplied volatility in the options market eased substantially. Inthe 22.5 and 25 strikes, for example, IV is around 95 percent anddown more than 40 percent on the day. So, despite the weakness inthe share price, the options market seems to be viewing recentdevelopments with a bit less anxiety and or pessimism.
Implied volatility is also falling in LCA Vision ( LCAV ), Freddie Mac ( FRE ), Fording Canadian Coal ( FDG ), XL Capital ( XL ), and ev3inc. Meanwhile, vols are on the rise Spectranetics ( SPNC ), MarineMax ( HZO ), and United Rentals ( URI ).
Unusual Volume Movers
AK Steel ( AKS ) is seeing double its trading volume with 42,000 contracts tradedand call options representing 64 percent of today’s volume.
Gap Stores ( GPS ) is seeing four times normal trading volume, with 21,000 contractstraded and call options representing 95 percent of today’svolume.
Ambak Financial ( ABK ) is seeing double its normal trading volume, with 31,000 contractstraded and 97 percent of today’s volume trading is calloptions.
Unusual volume (two times or more than normal average volume) isalso being seen in Kraft Foods ( KFT ), Amgen ( AMGN ), Comcast ( CMCSA ), Ciena ( CIEN ), Computer Sciences ( CSC ), and Crown Castle ( CCI ).