If you’re looking for an option play to make, check out the following possibilities from “Cusick’s Corner”. He lists the notable bullish and bearish stocks as well as stocks with an abnormal options volume and one that saw a jump in implied volatility from 36 percent to 48. Check it out, you just may find something that interests you.
Bullish Flow
Cisco (NASDAQ:CSCO) is off 9 cents to $20.13 and is one of 26 Dow stocks trading lower through midday. In options action, one investor appears to be anticipating a potential rebound and sold 10,000 June 19 puts on the stock at 46 cents to buy 10,000 June 21 calls at 49 cents. The bullish “risk-reversal”, for a three-cent debit, appears to be a new position that will make money if CSCO is trading above $21.03 (excluding transaction costs) through the June expiration. CSCO notched a 52-week high of $21.30 last Monday, but has suffered a four-day 5.2 percent slide since that time. This bullish combo seems to reflect expectations that CSCO will recover the losses in the months ahead.A similar trade surfaced in Dow component Intel (NASDAQ:INTC). Shares of the chip-making giant are off 20 cents to $27.86 and in morning trading, one strategist sold 10,700 July 26 puts on the stock at 78 cents to buy 10,700 July 29 calls for 78 cents. The Jul 26 – 29 bullish risk-reversal, at a 7-cent credit, seems to express the view that Intel will be trading north of $29 (4.1%) through mid-July. It’s possibly a closing trade, however, as open interest is greater than the day’s volume in both contracts. If opening, the strategist is looking for Intel to move higher, and is a willing buyer of shares if the stock falls to $26 (put strike price) or below through the July expiration.
Bearish Flow
AIG is down 74 cents to $32.15 and options volume on the stock is 40,000 contracts, with approximately 20,000 calls and 20,000 puts traded in the name through midday. The top trades surfaced in morning action when 4,635 January 30 puts traded on AIG for $2.80 when the market was $2.69 to $2.81 and 4,635 January 25 puts traded at $1.18 per contract when the bid-ask was $1.15 to $1.24. Taken together, the activity appears to be a substantial Jan 25 – 30 put spread for a $1.62 net debit. If it is an opening play, the best payoff happens if shares fall to $25 or less through the Jan expiration, which represents a 22.2 percent slide. A shareholder might have initiated the spread to help hedge recent gains. AIG is up approximately 40 percent so far in 2012.A large four-way spread trades in the SPDR 500 Trust (SPY) Monday. Shares are down $1.38 to $138.41 on a rough start to the trading week and one strategist sold 42,500 April 141 puts on SPY at $3.33, bought 42,500 April 131 puts for 25 cents, bought 35,000 May 138 puts for $2.99 and sold 35,000 May 128 puts at 77 cents. In other words, April 131 – 141 put spreads were sold at $3.08 to buy May 128 – 138 put spreads for $2.22. The activity appears to be rolling, and closing out a bearish spread in the April options, which expire in 11 days, to open a new one in May. An investor with a large stock portfolio might have initiated the spread to help hedge the risk of further losses in the US equity market. SPY is the exchange-traded fund that holds the S&P 500 names.
Unusual Volume
Micron Technology (NYSE:MU) options volume is 2X the average daily, with 151,000 contracts traded and call volume representing for 94 percent of the activity.Deere (NYSE:DE) options volume is running 2X the average daily, with 40,000 contracts traded and put volume accounting for 85 percent of the activity.
Increasing options activity is also being seen in AOL, Mylan (NYSE:MYL), and JC Penney (NYSE:JCP).
Implied Volatility Mover
AOL surged in premarket action and is up $8.38 to $26.80 through midday on heavy volume of 16.2 million shares after the New York-based media company struck a deal with Microsoft to sell approximately 800 patents for $1.06 billion. The stock is rallying around the news and 28,000 options traded on AOL so far. By way of comparison, typical volume through midday is about 500 contracts. 12,000 calls and 17,000 puts now traded in the name and levels of implied volatility moved up 36 percent to 48.See Daily Markets for the entire newsletter
