Real-time equity news
U.S. stock market report 1714 ET 24Sept2010 Options risk gauge falls, but above lows of the week
The CBOE Volatility Index, Wall Street's pulse of investor sentiment, fell 9.05 percent to 21.78 as the S&P 500 index finished up to 1,148.67. But the VIX, a 30-day risk forecast based off of S&P 500 options prices, is still above its low close of the week when it finished at 21.21 on Sept. 13 when the SPX rose 1.11 percent to 1,121.90. 'Add in the fact that this is Friday, and we normally see the VIX come in due to the repricing of time decay for the weekend, and it looks like traders are bidding up protection into the weekend,' said optionMonster analyst Chris McKhann in comments on the website. In volatility measures, VIX futures fell but outpaced the spot VIX. October futures came in and traded at 24.20. November futures were also down and settled at 27.20. 'All of the VIX futures in 2011 remain above 30, indicating that traders still believe that volatility will pick up through the end of the year and remain lofty,' McKhann said. 'That would coincide with a pullback in the equity markets.' He notes either the SPX will drop sharply, driving the VIX higher and those hedges will pay off, or the VIX futures will collapse on the spot value, making a nice payout for volatility sellers.'
Reuters Messaging: doris.frankel.reuters.com@reuters.net
1637 ET 24Sept2010
S&P ETF Oct put spread braces for downside
Two big put positions were transacted in the SPDRS S&P 500 exchange-traded fund, suggesting an investor may be bracing for downside after the market's recent rally. With SPY shares up 2.03 percent to $114.79, one strategist apparently bought the October $108-$110 put spread at 29 cents, which traded 50,000 times on the Nasdaq PHLX exchange, said WhatsTrading.com options strategist Frederic Ruffy. 'This is probably a short-term hedge or maybe a bet that today's rally won't hold over the next few weeks,' he said. In all, about
1.19 million puts vs 844,000 calls traded in the so
called SPYders, reflecting a put-to-call ratio of 1.41, according to Trade Alert.
Reuters Messaging: doris.frankel.reuters.com@reuters.net
1451 ET 24Sept2010
Nvidia calls heat up, fueled by big bullish trades
Chipmaker Nvidia Corp jumped 5.6 percent to $12.27 and options traders are looking to ride on gains after comments from the chief executive of software giant Oracle Corp. Larry Ellison said on Thursday that he is keen to make more acquisitions to bolster Oracle's technology and a microchip company could be a good fit. Two big bullish trades helped fuel Nvidia's volume to 4.6 times greater than usual with about 108,000 calls and 8,471 puts traded by 2:51 p.m. EDT, according to Trade Alert. In the first trade, 17,650 Jan 2011 $14 calls were bought for 51 cents and 17,650 Jan 2012 $22.50 calls were sold for 35 cents, resulting in a cost of 16 cents per call contract owned, said optionMonster analyst David Russell. The second trade entailed the purchase of 17,000 March $15 calls for 53 cents, matched against the sale of an equal number of Jan 2012 $20 calls for about 53 cents. Both are diagonal spreads, where investors sell longer-dated contracts to earn extra premium and thus reduce their cost basis while increasing leverage. 'The risk to the trades is that the shares fail to rally by the first expiration date, leaving a naked short the longer-dated upside contracts,' he said. Oracle's CEO stated at Thursday 'that the software company is looking to buy chip companies, which inspired the bullish activity in Nvidia call options today,' said Interactive Brokers Group analyst Caitlin Duffy.
Reuters Messaging: doris.frankel.reuters.com@reuters.net
1252 ET 24Sept2010
MKM recommends option trades to exploit low volatility
Three-month at-the-money implied volatility (IV) of the S&P 500 Index is 22.2 percent, just above its average over the past 12 months and almost seven volatility points higher than its mid-April low. Although this suggests that equity index volatility has room to the downside over the near term, the IVs of many stocks have already declined sharply toward 12-month lows, MKM Partners derivatives strategist Jim Strugger said. In a report, MKM covered 12 stocks whose percentile rank of three-month IV over the past year is below 15 percent and recommends a couple of trades to exploit this dynamic. Wal-Mart ranks 11 on the list. The stock's three-month implied volatility closed at 15.7 percent on Thursday, just above its low over the past 12 months and almost eight volatility points below its May peak. The stock has gained 11.8 percent from its July trough and is approaching MKM's 12-month fair value estimate of $55. A participant in WMT's recent appreciation who wants to hedge earnings, expected Nov. 16, could buy $52.50 WMT puts that expire three days later for 73 cents. MKM said a shareholder expecting more upside in Wal-Mart and wants to maintain directional exposure, could harvest recent gains and replace stock with Jan $55 calls offered at $1.53 on Friday.
Reuters Messaging: doris.frankel.reuters.com@reuters.net
1237 ET 24Sept2010-Blackstone gets big trade in longer
dated calls
One or more investors might be accumulating bullish positions on private equity firm Blackstone Group in the stock's longer-dated calls, said WhatsTrading.com options strategist Frederic Ruffy. A block of 30,250 January 2012 calls was transacted at the $15 line and traded at $1.05 when the bid-ask spread was 92 to 97 cents. The purchase might add to existing open interest, which is 38,625 contracts and now the biggest position in BX. On Sept 3, a block of 16,200 contracts traded at the 86-cent ask price, he said. Today's activity did come against the strike's open interest of 38,625 contracts as shares rallied, so it was probably a short position being closed in the calls, said optionMonster analyst David Russell. It's interesting because it appears like someone had initially sold these contracts -- likely as part of a covered-call position. If they bought back those calls, they want free rein on the upside, Russell said. Blackstone is very sensitive to conditions in the markets. 'When you consider how favorable interest rates have been, that's a positive,' he said. Another catalyst could be a strong equity market, which will drive up the value of its assets. Shares rose 5.94 percent to $11.41.
Reuters Messaging: doris.frankel.reuters.com@reuters.net; Editing by Andrew Hay Keywords: MARKETS STOCKSNEWS
COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
U.S. stock market report 1714 ET 24Sept2010 Options risk gauge falls, but above lows of the week
The CBOE Volatility Index, Wall Street's pulse of investor sentiment, fell 9.05 percent to 21.78 as the S&P 500 index finished up to 1,148.67. But the VIX, a 30-day risk forecast based off of S&P 500 options prices, is still above its low close of the week when it finished at 21.21 on Sept. 13 when the SPX rose 1.11 percent to 1,121.90. 'Add in the fact that this is Friday, and we normally see the VIX come in due to the repricing of time decay for the weekend, and it looks like traders are bidding up protection into the weekend,' said optionMonster analyst Chris McKhann in comments on the website. In volatility measures, VIX futures fell but outpaced the spot VIX. October futures came in and traded at 24.20. November futures were also down and settled at 27.20. 'All of the VIX futures in 2011 remain above 30, indicating that traders still believe that volatility will pick up through the end of the year and remain lofty,' McKhann said. 'That would coincide with a pullback in the equity markets.' He notes either the SPX will drop sharply, driving the VIX higher and those hedges will pay off, or the VIX futures will collapse on the spot value, making a nice payout for volatility sellers.'
Reuters Messaging: doris.frankel.reuters.com@reuters.net
1637 ET 24Sept2010
S&P ETF Oct put spread braces for downside
Two big put positions were transacted in the SPDRS S&P 500 exchange-traded fund, suggesting an investor may be bracing for downside after the market's recent rally. With SPY shares up 2.03 percent to $114.79, one strategist apparently bought the October $108-$110 put spread at 29 cents, which traded 50,000 times on the Nasdaq PHLX exchange, said WhatsTrading.com options strategist Frederic Ruffy. 'This is probably a short-term hedge or maybe a bet that today's rally won't hold over the next few weeks,' he said. In all, about
1.19 million puts vs 844,000 calls traded in the so
called SPYders, reflecting a put-to-call ratio of 1.41, according to Trade Alert.
Reuters Messaging: doris.frankel.reuters.com@reuters.net
1451 ET 24Sept2010
Nvidia calls heat up, fueled by big bullish trades
Chipmaker Nvidia Corp jumped 5.6 percent to $12.27 and options traders are looking to ride on gains after comments from the chief executive of software giant Oracle Corp. Larry Ellison said on Thursday that he is keen to make more acquisitions to bolster Oracle's technology and a microchip company could be a good fit. Two big bullish trades helped fuel Nvidia's volume to 4.6 times greater than usual with about 108,000 calls and 8,471 puts traded by 2:51 p.m. EDT, according to Trade Alert. In the first trade, 17,650 Jan 2011 $14 calls were bought for 51 cents and 17,650 Jan 2012 $22.50 calls were sold for 35 cents, resulting in a cost of 16 cents per call contract owned, said optionMonster analyst David Russell. The second trade entailed the purchase of 17,000 March $15 calls for 53 cents, matched against the sale of an equal number of Jan 2012 $20 calls for about 53 cents. Both are diagonal spreads, where investors sell longer-dated contracts to earn extra premium and thus reduce their cost basis while increasing leverage. 'The risk to the trades is that the shares fail to rally by the first expiration date, leaving a naked short the longer-dated upside contracts,' he said. Oracle's CEO stated at Thursday 'that the software company is looking to buy chip companies, which inspired the bullish activity in Nvidia call options today,' said Interactive Brokers Group analyst Caitlin Duffy.
Reuters Messaging: doris.frankel.reuters.com@reuters.net
1252 ET 24Sept2010
MKM recommends option trades to exploit low volatility
Three-month at-the-money implied volatility (IV) of the S&P 500 Index is 22.2 percent, just above its average over the past 12 months and almost seven volatility points higher than its mid-April low. Although this suggests that equity index volatility has room to the downside over the near term, the IVs of many stocks have already declined sharply toward 12-month lows, MKM Partners derivatives strategist Jim Strugger said. In a report, MKM covered 12 stocks whose percentile rank of three-month IV over the past year is below 15 percent and recommends a couple of trades to exploit this dynamic. Wal-Mart ranks 11 on the list. The stock's three-month implied volatility closed at 15.7 percent on Thursday, just above its low over the past 12 months and almost eight volatility points below its May peak. The stock has gained 11.8 percent from its July trough and is approaching MKM's 12-month fair value estimate of $55. A participant in WMT's recent appreciation who wants to hedge earnings, expected Nov. 16, could buy $52.50 WMT puts that expire three days later for 73 cents. MKM said a shareholder expecting more upside in Wal-Mart and wants to maintain directional exposure, could harvest recent gains and replace stock with Jan $55 calls offered at $1.53 on Friday.
Reuters Messaging: doris.frankel.reuters.com@reuters.net
1237 ET 24Sept2010-Blackstone gets big trade in longer
dated calls
One or more investors might be accumulating bullish positions on private equity firm Blackstone Group in the stock's longer-dated calls, said WhatsTrading.com options strategist Frederic Ruffy. A block of 30,250 January 2012 calls was transacted at the $15 line and traded at $1.05 when the bid-ask spread was 92 to 97 cents. The purchase might add to existing open interest, which is 38,625 contracts and now the biggest position in BX. On Sept 3, a block of 16,200 contracts traded at the 86-cent ask price, he said. Today's activity did come against the strike's open interest of 38,625 contracts as shares rallied, so it was probably a short position being closed in the calls, said optionMonster analyst David Russell. It's interesting because it appears like someone had initially sold these contracts -- likely as part of a covered-call position. If they bought back those calls, they want free rein on the upside, Russell said. Blackstone is very sensitive to conditions in the markets. 'When you consider how favorable interest rates have been, that's a positive,' he said. Another catalyst could be a strong equity market, which will drive up the value of its assets. Shares rose 5.94 percent to $11.41.
Reuters Messaging: doris.frankel.reuters.com@reuters.net; Editing by Andrew Hay Keywords: MARKETS STOCKSNEWS
COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.