Monday Options Recap

Sentiment

Stock market averages are lower, but without much volume or volatility Monday. With no domestic economic news slated until Tuesday’s PPI and Retail Sales data, stocks followed their European counterparts lower in morning trading. A 1.3 percent dip in France’s CAC 40 Index helped pace the decline across the Europe and the euro lost .8 percent on the buck after data showed Eurozone Industrial Production falling at the fastest pace since 2009 during the month of September. Uncertainty about the debt crisis as Italy and Greece attempt to forge new governments added to anxiety levels. However, the decline has been orderly on Wall Street and the Dow Jones Industrial Average is down 84 points. The NASDAQ lost 23.5. CBOE Volatility Index (.VIX) added 1.82 to 31.86. Overall volume is light, with 6.7 million calls and 6.1 million puts traded across the exchanges so far.

Bullish Flow

77,000 calls and 32,000 puts traded on Home Depot (HD) ahead of earnings. Shares opened higher after peer Lowe's (LOW) reported better-than-expected results. However, early gains were lost and shares are now down a penny to $38.05. In options action, November 39 calls are the most actives in Home Depot. 28,740 traded at a VWAP of 44.8 cents. The top trade is a 2270-lot at 48 cents. Another player sold 3,000 Nov 37 calls on the stock at $1.60 and bought 1,500 Nov 39s for 39 cents -- possibly rolling a position from ITM to OTM calls. Nov 38 puts and calls, which are now near-the-money, are seeing brisk trading as well. Meanwhile, implied volatility in HD options is up 11.5 percent to 32 and the overall tone of trading seems somewhat bullish, perhaps on hopes Home Depot will also post better-than-expected results when the company reports Tuesday morning. Monthly retail sales and earnings from Walmart will set the tone for morning trading in the retail sector as well.

Titanium Metals (TIE) sees a morning spike to $16.13 and is now up 28 cents to $15.88. Options volume on the stock is 7,250 calls and 190 puts. Dec 17 calls, which are 7.1 percent OTM and expire in 32 days, are the most actives.1,821 traded (55% Ask). The flow also includes a multi-exchange sweep of 1,500 Dec 19 calls at the 20-cent asking price. 1,762 traded. Nov 16 and Dec 18 calls are actively traded as well. No news on the stock. Earnings were reported on Nov 3. The spike in shares and the high call volume hint at some type of chatter and implied vols in the options on the stock are up 12.5 percent to 52.5.

Bearish Flow

Direxion Daily Small Cap Bear 3X ETF (TZA) is up $1.56 to $30.65 and a Nov 30 - 40 call spread trades on the fund for $1.76, 10000X. It might close a position, as open interest is sufficient to cover in both contracts. Or, it might be an opening play and a bet that the equity market will remain under pressure through the weekend. Buying call spreads on a leveraged, inverse ETF represents a bullish play on shares and therefore a bearish market bet.

Implied Volatility Mover

Career Education (CECO) adds 51 cents to $8.21 after the company announced plans to sell Istituto Marangoni to an investor group led by Providence Equity Partners for between $17 to $20 million and, separately, the firm’s Board authorized the repurchase of up to $100 million in shares. The stock is trying to recover some of the two-day 53.8 percent plunge suffered after earnings were reported earlier this month. Meanwhile, in options action today, Dec 7 puts are the most actives in CECO. 5,324 traded, including a 596-lot traded on the 25-cent bid on ISE. Data indicate a customer sold-to-open. 73 percent of the volume traded on the bid and implied volatility in the options on the for-profit education company is down 8 percent to 79, as some players might be writing the puts on the view that the stock will hold its recent 52-week low of $7.37 set on 11/3.

Unusual Volume Movers

Bullish flow detected in Cheniere Energy (LNG), with 28732 calls trading, or 3x the recent average daily call volume in the name.

Bearish activity detected in Marathon Petroleum (MPC), with 5420 puts trading, or 14x the recent average daily put volume in the name.

Bullish flow detected in Boyd Gaming (BYD), with 6161 calls trading, or 14x the recent average daily call volume in the name.

Meanwhile, unusually high options volume is being seen in Dell (DELL), J.C. Penney (JCP), and Lowe’s (LOW).