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Front-Month Puts Pop on Kraft Foods Inc.

Sarah Wasserman (swasserman@sir-inc.com)

3/15/2010 3:43:36 PM

Kraft Foods Inc. (KFT) has seen a surge of put activity today, as option players rush to place their bets on the soon-to-expire March series. Specifically, KFT has had 5,374 puts cross the tape, well above the equity's expected put volume of 4,068.

Put players have zeroed in on the March series, which is slated to expire after the close this Friday. Specifically, the March 32 put has seen volume of 988, with 70% crossing at the bid, suggesting a good portion of these puts were sold. With KFT up 8.4% in 2010, it's possible KFT put owners are closing out their positions as the equity begins to approach the $32 level.

The March 30 put is also receiving a notable amount of attention today, with 903 contracts crossing the tape -- 89% at the ask price, implying that a hefty chunk of these puts were bought. However, with open interest at this strike currently poised at 10,853, it's difficult to determine whether these puts were newly added.

Currently, option players are feeling optimistic about KFT, as reflected in the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.64, which ranks in the 22nd annual percentile. In other words, short-term speculators have been more bullish toward KFT only 22% of the time during the past year.

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Wal-Mart Stores Calls Gain Popularity After Citigroup Upgrade

Joseph Hargett (jhargett@sir-inc.com)

3/15/2010 3:26:01 PM

Wal-Mart Stores (WMT) shares have vaulted nearly 3% higher today, after Citigroup upgraded the equity. Citing the company's ability to "step up its price investments in food and consumable categories to drive market share gains from supermarkets without sacrificing margins," Citi lifted its rating on WMT to "buy" from "hold." The move has spiked considerable volume in the options pits, as more than 99,000 contracts have changed hands so far today, more than tripling the stock's daily average.

The bulls are largely in control of WMT's options activity today, as about 79% of today's volume has traded on the call side, according to data from WhatsTrading.com. Call volume is nothing new for the equity, however, as data from the International Securities Exchange (ISE) and Chicago Board Options Exchange (CBOE) point toward heavy buying activity. Specifically, WMT's 10-day ISE/CBOE call/put volume ratio of 3.15 indicates that calls bought to open have more than tripled puts purchased during the prior two weeks. This ratio also ranks above all but 10% of those taken in the past year, meaning that options traders have not snatched up calls at a faster pace relative to puts during the prior 52 weeks.

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Eastman Kodak Option Volume Swells as Shares Break Out of Trading Range

Joseph Hargett (jhargett@sir-inc.com)

3/15/2010 2:53:25 PM

Eastman Kodak Company (EK) shares are up nearly 4% so far today, as the stock makes a break for higher ground following a nearly month-long consolidation below $6 per share. The move has not gone unnoticed by options traders, as volume has soared to more than 25,000 contracts, outstripping the EK's daily average of 3,243 contracts by more than seven to one. There appears to be only a slight bullish bias to this activity, however, as about 58% of today's volume has traded on the call side, according to data from WhatsTrading.com.

The most popular call on the session is the March 6 strike, where 1,500 contracts have changed hands on open interest of 12,944 contracts, while another 800 contracts traded on EK's April 6 call. On the put side, options traders have sent some 900 contracts across the tape at both the March 6 and April 6 strikes, which sport open interest of 6,000 contracts and 7,149 contracts, respectively.

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Puts Pick Up on Adobe Systems Incorporated

Sarah Wasserman (swasserman@sir-inc.com)

3/15/2010 12:36:14 PM

Adobe Systems Incorporated (ADBE) saw a spike in put activity Friday, with volume soaring to 3,469, well above the equity's expected put volume of 2,493. In addition to Friday's increased preference for puts, option players had a decreased appetite for calls, with 492 contracts crossing the tape -- just 13% of ADBE's usual call volume of 3,618.

ADBE's April 35 put was Friday's most popular strike, with 2,679 contracts changing hands on open interest of 2,198. Over the weekend, open interest at this strike increased by 863, indicating that at least a portion of these puts were newly added. The April 35 strike is currently home to peak put open interest for the back-month series, with 3,061 contracts in place.

Currently, ADBE's 10-day International Securities Exchange (ISE) put/call volume ratio checks in at 4.04, indicating that speculators have bought to open puts over four times as often as calls during the past two weeks. This ratio is in the 98th annual percentile --revealing that speculators on the ISE have shown a greater preference for puts only 2% of the time during the past year.

At last check, ADBE was perched in the $35.13 area.

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KLA Tencor (KLAC) Downgrade Draws Front-Month Put Activity

Andrea Kramer (akramer@sir-inc.com)

3/15/2010 12:01:10 PM

KLA Tencor (KLAC) was downgraded from "perform" to "underperform" at Oppenheimer this morning, pressuring the shares more than 5% lower and sparking a flood of front-month put activity. At midday, the semiconductor supplier has already seen close to 6,900 puts change hands � about 10 times its expected single-session volume of fewer than 700 contracts.

Most of the action has centered on KLAC's at-the-money March 28 put, which has seen 5,225 contracts cross the tape so far. Ninety-eight percent of the puts have traded at the ask price, suggesting they were likely bought, though the option's implied volatility has already depleted by 20%, pointing to waning demand. Though we can't yet tell the specifics until tomorrow, it seems some of today's activity could consist of March 28 put writers liquidating their losing positions ahead of expiration.

Prior to today's retreat, the KLAC's sentiment backdrop reveals that option traders were becoming increasingly optimistic toward the stock. The equity's 10-day call/put volume ratio of 3.44 on the International Securities Exchange (ISE) implies that during the past two weeks, traders have bought to open more than three times as many KLAC calls as puts. What's more, this ratio stands only 10 percentage points from an annual bullish peak, indicating that speculators on the ISE have initiated bullish bets over bearish at a faster pace only 10% of the time during the past year.

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Commentary by WhatsTrading.com

Unusual Activity Roundup, Mar 15

3/15/2010 4:00:05 PM

Some less actively traded names seeing bullish order flow: Finisar (FNSR), Polycom (PLCM), Medicis Pharmaceuticals (MRX) Bearish order flow: Praxair (PX), Wabco Holdings (WBC), Pinnacle Entertainment (PNK) Post Earnings: American Oriental (AOB), GTX Inc (GTXI) Pre-Earnings: AthenaHealth (ATHN), Factset (FDS) Ex-div.: Apollo Investment (AINV)

Read more at WhatsTrading.com

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Baidu Inc (BIDU) $571.81 +3.92%

3/15/2010 3:00:04 PM

Baidu.com (BIDU) shares have been volatile today, hitting a high of $628.50 on uncertainty about Google's (GOOG) plans for China. Flyonthewall says we're likely to see increasing interest in a GOOG - BIDU pairs trade, where investors sell Google and buy Baidu on the idea that what's bad for Google Internet search is good for its biggest competitor in China. BIDU rallied to fresh all-time highs in morning action, but has since come off its best levels. With shares now up $20.76 to $571 options volume is 3X the average daily, with 45K calls and 41K puts traded. The top trade is a bearish Mar 580 - 590 put spread at $5 on ISE. Beyond that, the next biggest trade is a lot of 258 Jun 600 calls on the bid $33.30. Meanwihle, BIDU implied volatility is up about 10 percent to 38.

Read more at WhatsTrading.com

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General Electric Company (GE) $17.08 +0.23%

3/15/2010 1:20:02 PM

GE is flat at $17.04 and March 17.5 calls are busy Monday. More than 43K traded and some of the action might be closing. Open interest is 181.4K and the biggest OI position of any GE contract. However, the top trade is a block of 2738 contracts at 17 cents on the ISE, which traded just after the opening bell and appears to be an opening customer buyer, according to ISEE data. The interest in GE calls comes on news the company is selling its electrostatic precipitator and emissions monitoring businesses to McDermott and the day before it presents at a Goldman Sachs Industrial Unscripted Conference. GE is also presenting at a Jefferies Global Clean Tech Conference tomorrow and Wednesday.

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Walmart Stores Inc (WMT) $55.03 +2.10%

3/15/2010 11:20:05 AM

Walmart (WMT) is up $1.05 to $54.95 and Mar 55 calls are among the most actives early Monday after Citigroup upgraded the stock to Buy. 13.1K traded (20% Bid / 27% Mid / 53% Ask). Another 8500 April 55 calls also changed hands. Implied volatility in WMT is steady around 14.25 as the stock runs towards 2009 and early 2010 resistance highs between $52.00 and $52.20.

Read more at WhatsTrading.com

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Amylin Pharmaceuticals Inc (AMLN) $22.13 +9.23%

3/15/2010 10:20:02 AM

Amlyin Pharmaceuticals (AMLN) implied volatility is crashing after the company received a complete response letter from the FDA related to exenatide once weekly. In a conference call, the company said it expects product approval once issues are addressed. Shares touched a new 52-week high and are up $1.66 to $21.92 on the news. Trading in the options is active, with 14K calls and 8450 puts, incuding a recent seller of 1100 Mar 21 calls at $1.25. Meanwhile, implied volatility has plummeted about 155 percent, back to the mid 50s, now that this event risk has passed.

Read more at WhatsTrading.com

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Unusual Activity Roundup, Mar 12

3/12/2010 4:00:03 PM

Some less actively traded names seeing bullish order flow: Corinthian Colleges (COCO), Golden Star Resources (GSS), Zoltek (ZOLT) Bearish order flow: Brinker (EAT), Continental Resources (CLR), Williams Partners (WPZ) Post Earnings: Ann Taylor (ANN), National Semi (NSM), Aeropostale (ARO), ATP Oil and Gas (ATPG) Pre-Earnings: GTX Inc. (GTXI) Ex-div.: H-P (HPQ), Terra Industries (TRA), Methanex (MEOH)

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Citigroup Inc (C) $4.00 -4.43%

3/12/2010 3:20:01 PM

Citi (C) has seen heavy trading this week and, after a four-day 19.4 percent rally, shares are down 20 cents to $3.98, falling to session lows. Another 1.34 million calls and 565K puts traded on the bank today. The top two options trades so far today: 140K and 112K Jan $5 calls at the asking price of 36 cents on AMEX. The 112K were sold and might close an existing position. Open interest in the Citi Jan 5 calls is more than 1.8 million and by far the largest of any options contract. The high OI in the Jan 5s seems to reflect a view shared by some investors that the worst is over and shares will settle above $5 at the Jan 2011 expiration. However, C is down today and Oppenheimer notes that after the recent run-up, with 30 bln shares outstanding, Citi's market cap is now approaching its bigger competitors. The firm sees the stock as fairly valued.

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Intrepid Potash Inc (IPI) $31.64 +11.33%

3/12/2010 2:20:02 PM

Intrepid Potash (IPI) is seeing relative strength and active options trading on the heels of upbeat earnings guidance from Potash (POT) -- see POT 9:40 color. IPI is up $3.23 to $31.65 and options volume is 6X the recent average daily, with 14K calls and 3000 puts traded. The action is scattered across March and April calls with strike prices ranging from 29 to 35. Implied volatility is easing about 3 percent to 39.

Read more at WhatsTrading.com

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Alcoa Inc (AA) $13.68 +0.31%

3/12/2010 12:00:02 PM

Alcoa (AA) is up 4 cents to $13.68 and a block of 5986 April 12 puts at 18 cents on the ISE is an opening customer buyer, according to ISEE data. 12.2K now traded. Looks like some hedging activity. AA is due to release earnings April 12, according to the company's web site, and before the April expiration.

Read more at WhatsTrading.com

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Potash Corp (POT) $125.60 +7.41%

3/12/2010 10:20:03 AM

Potash (POT) is up $9.32 to $126.25 and POT options are seeing brisk trading after the company increased its first quarter earnigns guidance to $1.30 - $1.50 per share, from .70 to $1.00. 17K calls and 5660 puts traded on POT so far. The top trade looks like an April 100 - 125 strangle, bought at $7.83, 400X.

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More Options Commentaries and Observations by Schaeffer�s

Market Recap: Blue Chips Battle Back in Eleventh-Hour Rebound

Stocks wallowed in the red for most of the session today, thanks to escalating concerns about the health of the global economy. In the East, Chinese Premier Wen Jiabao noted the country's difficult task of simultaneously managing "inflation expectations" while promoting economic growth, which accelerated fears that China's central bank will take further steps to curb lending. Elsewhere, Moody's Investors Service added fuel to the bearish fire, warning of ratings-related risks for a slew of economic powerhouses, including France, Germany, Great Britain, and the U.S. Nevertheless � and despite lingering jitters ahead of the Federal Reserve's interest-rate policy meeting tomorrow � the blue chips battled back in the final hour of trading, with the Dow Jones Industrial Average muscling higher by the close.

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Options Strategy of the Day: The Reverse Iron Condor

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Options Update: Traders Predict a Post-Earnings Pop for Nike, Inc. (NKE)

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Harley-Davidson, Inc. Singled Out for a Calendar Spread

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