Friday Options Recap

Sentiment

Stock market averages are holding gains on hopes French and German officials are now on the same page about solving the debt crisis ahead of EU summits. Solid gains across the Eurozone helped set the table for the morning gains on Wall Street. The euro added .6 percent on the buck and Germany’s DAX paced an advance across equity markets with a 3.6 percent rally. In the US, the economic calendar holds no stats and a lot of the focus is on earnings. McDonald’s (MCD), Seagate (STX), and Honeywell (HON) are among the names rallying on strong results. Sentiment is upbeat and the Dow has added 205 points. The tech-heavy NASDAQ gained 26.2. CBOE Volatility Index (.VIX) lost 2.55 to 32.23. Trading in the options market is active due to the expiration. 9.1 million calls and 7.4 million puts traded across the exchanges so far.

Bullish Flow

Halozyme Therapeutics (HALO) trades up 47 cents to $8.19 after the biotech announced positive results from two Phase IIb trials from an Insulin-PH20 program. Shares are touching new 52-week highs on the data and options volume is running 50X the daily average. Much of the volume is due to one spread trade, in which the investor bought a Dec - March 7.5 call spread and sold a Dec - Mar 5 put spread, collecting 10 cents, 1500X. The four-way probably rolls a Dec 5 - 7.5 bullish risk-reversal, which is already in-the-money, from December till March. Shares have rallied 34.8 percent this week alone and today's bullish combo trader seems to be looking for additional gains through March 2012

Bearish Flow

Carnival Cruise (CCL) adds 96 cents to $34.86 and an Oct 34 - Nov 35 call spread is sold on the stock at 22 cents, 12500X. The spread appears to roll a position ahead of the expiration -- possibly part of an overwrite strategy. CCL is down 24.3 percent year-to-date, but well off (22.2 percent) the lows seen earlier this month, when the stock fell to $28.52 intraday on Oct 4. Today's call writer might not see much upside beyond $35 through the Nov expiration, even though that's only 14 cents above current levels.

JPMorgan (JPM) adds 81 cents to $33.94 early Friday morning and is one of 28 Dow stocks moving higher. In options action, a 14000-contract block of Oct 33 calls is sold on the bank this morning at 90 cents. It’s possibly a liquidating trade. Open interest is 29,090 and the second largest position in JPM front-month calls behind Oct 30 puts, which have 37.8K in open interest. October options expire after today.

Implied Volatility Mover

Research In Motion (RIMM) adds 48 cents to $22.79 and one player sells 12,000 Jan 20 puts on the Blackberry maker at $1.90 per contract. It possibly exits some of a position opened at the end of September when 22,000 were bought at $2.77 (rolling out of 19K Jan 22 puts sold at $4.05). Shares were probing 52-week lows around $20 at that time, but are up 12.5 percent month-to-date. Today’s put writer might be closing out positions on diminishing concerns about the short-term outlook for RIM shares. Meanwhile, implied volatility in the options is down about 3 percent to 75 and now well off the 52-week highs of 97 seen in mid-September.

Unusual Volume Movers

Bearish activity detected in ION Geophysical (IO), with 2335 puts trading, or 8x the recent average daily put volume in the name.

Bullish flow detected in Vivus (VVUS), with 5227 calls trading, or 5x the recent average daily call volume in the name.

Bullish flow detected in Dendreon (DNDN), with 13280 calls trading, or 2x the recent average daily call volume in the name.

Meanwhile, increasing options activity is also being seen in BP (BP), Seagate Tech (STX) and Verizon (VZ).