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Traders Add Bearish Bets on ON Semiconductor Corporation (ONNN)

Jocelynn Drake (jdrake@sir-inc.com)

2/9/2010 1:43:00 PM

ON Semiconductor Corporation (ONNN: sentiment, chart, options) has seen an increase in options trading this afternoon, as more than 25,700 contracts have crossed the tape. This surge in volume is more than eight times the equity's average daily trading volume of 3,199 contracts, according to data from WhatsTrading.com. In addition, 97% of the volume changed hands on the put side.

Drilling down on the action, we find that the July 7 put traded more than 7,000 contracts on open interest of 5,922 contracts. The July 8 put has traded nearly 7,100 contracts on open interest of 6,384 contracts. And finally, the July 9 put has traded 7,025 contracts on open interest of 5,788 contracts.

Overall, options players have been growing more skeptical toward the shares. The International Securities Exchange (ISE) 10-day put/call volume ratio comes in at 0.99, which is higher than 83% of all those taken during the past year, pointing to a growing skepticism.

Technically speaking, the shares of ONNN are up more than 1% this afternoon along with the rest of the broad market. The equity has climbed above its 10-day moving average, which has acted as resistance since mid-January.

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Call Trading Builds Toward Nvidia (NVDA) Despite Technical Weakness

Jocelynn Drake (jdrake@sir-inc.com)

2/9/2010 12:02:03 PM

Nvidia (NVDA: sentiment, chart, options) has seen an increase in option trading today, as more than 45,800 contracts have crossed the tape. This surge in volume is more than double the stock's average daily trading volume of 17,372 contracts, according to data from WhatsTrading.com. In addition, approximately 83% of the volume has changed hands on the call side.

Drilling down on the action, we find that the February 16 call has traded more than 4,300 contracts on open interest of 3,569 contracts. Meanwhile, the March 16 call has traded 6,000 contracts on open interest of 8,123 contracts, and the March 15 call has traded nearly 5,500 contracts on open interest of 3,686 contracts. The March 17 call has also traded nearly 5,500 contracts on open interest of 6,462 contracts. In the June series, the 15, 16, and 17 strikes have all traded more than 4,000 contracts each.

Meanwhile, options trading is light on the put side. The February 18 put has traded more than 4,500 contracts on open interest of 10,300 contracts.

In trading this afternoon, the shares of NVDA are flat, hovering around the breakeven mark. The equity has dropped more than 13% since the beginning of the year, as it has been guided lower by resistance at its 10-day moving average since early January.

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Long-Term Pessimism Rising Toward Radian Group (RDN)

Jocelynn Drake (jdrake@sir-inc.com)

2/9/2010 11:31:35 AM

Radian Group (RDN: sentiment, chart, options) has seen an increase in put trading this morning, as more than 10,000 put contracts have crossed the tape. This surge in volume is more than 29 times the equity's average daily put trading volume, according to data from WhatsTrading.com.

The January 2011 2.50 put has seen 10,000 contracts cross the tape on open interest of 1,734 contracts. Earlier this morning, a block of 10,000 contracts changed hands at a bid price of $0.30, indicating that the options were most likely sold.

Technically speaking, the shares of RDN are up nearly 1% this morning, eating away at the stock's year-to-date loss of more than 12%. The equity is currently battling pressure from its declining 10-day moving average.

Overall, there has been an increase in put trading toward the shares. The International Securities Exchange (ISE) reports that 1.2 puts have been purchased to open for every one call purchased to open during the past 10 trading sessions. This ratio is higher than 91% of all those taken during the past year. Furthermore, the Schaeffer's put/call open interest ratio rests at 0.63, which is higher than 72% of all those taken during the past year.

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Call Trading Skyrockets on Occidental Petroleum (OXY)

Jocelynn Drake (jdrake@sir-inc.com)

2/9/2010 10:55:28 AM

Occidental Petroleum (OXY: sentiment, chart, options) has been the center of some brisk options trading this morning, as more than 57,200 contracts have crossed the tape. This surge in volume is more than triple the equity's average daily trading volume of 17,021 contracts, according to data from WhatsTrading.com. In addition, 99% of the volume has changed hands on the call side.

Digging into the action, we find that the February 60 call has traded 27,100 contracts on open interest of 27,216 contracts. At 9:53 a.m. Eastern time, a block of 27,100 contracts changed hands at a bid price of $17.25, indicating that a trader may potentially be closing an existing position.

Meanwhile, the May 60 call has traded 26,800 contracts on open interest of 16,697 contracts. The option saw a block of 26,800 contracts change hands at $18.20, but the transaction was marked "late," making it difficult to tell if the contracts were purchased or sold. It appears that a trader may be rolling out an existing short-term position to a longer-dated option.

At last check, the shares of OXY were up 1.3% on the session, but down more than 6% since the beginning of the year. The equity is currently clinging to support in the 75 region, but it is hitting resistance at its declining 10-week trendline.

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Iron Condor on Biogen Idec (BIIB)

Jocelynn Drake (jdrake@sir-inc.com)

2/9/2010 10:38:33 AM

Biogen Idec (BIIB: sentiment, chart, options) announced this morning that fourth-quarter earnings rose by nearly half as price increases helped lift revenue from its multiple sclerosis drugs. Net earnings in the quarter rose to $306 million, or $1.06 a share, from $207 million, or 70 cents a share, a year ago. Earnings excluding one-time items were $1.20 a share, beating the Street's average estimate of $1.05 per share. Revenue rose about 5% to $1.1 billion.

The company said it expects revenue growth in 2010 in the mid-single digit range, versus analyst expectations of about 4%. BIIB expects 2010 earnings per share above $4.55 before one-time items. Analysts, on average, expect a profit of $4.38 a share on revenue of $4.52 billion.

Options trading has been brisk this morning, with more than 16,300 contracts crossing the tape. This surge in volume is more than four times the equity's average daily trading volume of 3,597 contracts, according to data from WhatsTrading.com.

Digging into the action, we find that the March 60 call has seen more than 4,000 contracts on open interest of 290 contracts. At 9:58 a.m. Eastern time, a block of 3,720 contracts changed hands at an ask price of $0.45. Meanwhile, the March 55 call had a block of 3,720 contracts trade at a bid price of $1.50.

But that's not all. On the put side, the March 45 put saw a block of 3,720 contracts trade at an ask price of $0.25, while the March 50 put had a block of 3,720 contracts change hands at a bid price of $0.70.

On the call side, the trader received a credit of $1.05, while on the put side, he received a credit of $0.45. The total credit on the position was $1.50. It appears that the trader opened a iron condor with the expectation of the shares remaining between the sold 55 and 50 strikes when March options expire.

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Commentary by WhatsTrading.com

Annaly Capital Management Inc (NLY) $17.33 -3.08%

2/9/2010 2:20:03 PM

Annaly Mortgage (NLY) gapped down and is off 54 cents to $17.34 after the company announced an offering of convertible senior notes. Shares sank on the news and options volume is running 4X the average daily. 26K puts and 15K calls traded so far. While Jan12 7.5 puts are the most actives, some investors appear to be using the weakness to inititate bullish trades in Feb and Mar 18 calls. In fact, prior to the announcement this morning, FBR analysts were out with positive comments on NLY, saying they're buyers at current levels, with the stock trading at 1.05X book and offering a 16.5 percent div. yield.

Read more at WhatsTrading.com

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CBOE Volatility Index (.VIX) $26.06 -1.70%

2/9/2010 12:20:03 PM

VIX has come off session lows of 25.12 and is back to unchanged at 26.51 after the S&P 500 moves more than 10 points off session highs. There does not seem to be one specific catalyst for the turnaround, but note that BofA (BAC), which led the Dow lower with a 3.5 percent loss yesterday, has given up early gains and is down .22 to 14.26. BAC is now falling to its worst levels of the day amid relative weakness in the financials.

Read more at WhatsTrading.com

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Radian Group Inc (RDN) $6.65 +3.74%

2/9/2010 11:20:05 AM

Radian shares are up 20c to $6.60 notable trade in the $2.50 puts with 2011 expiry as 10,000 traded at the 30c asking price. Looks like closing a position opened on 12/22 when shares where around $8.20 and put was trading 25c. The mortgage insurance company is slated to report earnings Feb. 23.

Read more at WhatsTrading.com

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Cell Therapeutics Inc (CTIC) $0.76 +18.84%

2/9/2010 10:00:03 AM

Cell Therapeutics (CTIC) continues to see heavy trading. After losing 42 cents to 64 cents per share yesterday, shares have added 10 this morning, to 74 cents, ahead of tomorrow's FDA panel related to the company's cancer drug Pixantrone. Meanwhile, CTIC Feb 1 put is the most actively traded options contract early Tuesday, with more than 42K on the tape if the first 15 min. Some investors might be liquidating positions after the plunge in the share price yesterday. The top trade is 10K on the bid at 30 cents. Open interest is 81.7K.

Read more at WhatsTrading.com

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Dell Inc (DELL) $13.46 +1.70%

2/8/2010 4:00:04 PM

Dell Computer is seeing relative strrength and calls are active for a second day. Open interest in DELL calls increased by 28000 (compared to -1126 puts) following a day of active trading Friday. Today, another 49K calls and 12K puts traded. Shares are up 23 cents to $13.47 and the top trade is a block of 2212 Feb 13 calls at 70 cents this morning on ISE, which is an opening buyer, according to ISEE data. 11k traded total. Another 16.2K Feb 14 calls also changed hands. The two days of increasing call volumes comes ahead of Dell's Feb 18 earnings release, which is one day before the Feb contracts come off the board.

Read more at WhatsTrading.com

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Electronic Arts Inc (ERTS) $17.66 +2.32%

2/8/2010 2:20:05 PM

Options action is heating up in Electronic Arts (ERTS) ahead of earnings. There seems to be some optimism building. Shares are up 41 cents to $17.67 and call volume is outpacing put activity by almost three-to-one. More than 12K calls and 4790 puts changed hands so far. Feb 19 calls are the most actives and zero percent of today's 7000+ contracts are on the bid (33% Mid / 66% Ask). Implied volatility is up about 7 percent to 52 and a skew between Feb (52.6 percent) and Mar (43 percent) hints at a possible earnings gap move of about $1.06, or 6 percent, when ERTS reports after the closing bell.

Read more at WhatsTrading.com

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Calpine Corporation (CPN) $11.05 +1.01%

2/8/2010 1:20:05 PM

Calpine shares are up 10c to $11.05 and option volume is 3x the daily average being driven by block trade in LEAPs as the $12.50 calls Jan 2011 trade 5,000 contracts were bought for $1.10 and then in then 3,000 contracts (now total of 5,000) of the $12.50 calls with the 2012 expiry traded at $1.90 a contract. Both appear to be opening; checking as to whether this was spread sale.

Read more at WhatsTrading.com

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CIT Group Inc (CIT) $31.86 +3.61%

2/8/2010 12:20:03 PM

CIT Group (CIT) is seeing relative strength and increasing options action (3X avg daily) on news it has hired John Thain as CEO. In his 30-year career, Thain has risen to top executive positions at Merrill, Goldman, and the NYSE. Shares are up $1.02 to $31.79 on the news and July 32 calls are being sold as part of buy-write trades. For example, a block of 3800 contracts near the bid, at $4.85, coincided with a block of 380K CIT shares at $32.05. 12.3K July 32 calls nows traded vs. 23 contracts in open interest.\n
\nSo, in this example, a buy-write or covered call is created by selling 1 July 32 callsat $4.80 against 100 shares at $32.00. Doing so reduces the cost basis of owning shares to $27.20, which becomes the breakeven through the July expiration (or 158 days), excluding commissions. The upside is also limited by the strike price of the call, or $32. If shares are trading for $32 or more at expiration (or possibly before), the calls will be assigned at $32 and the investor will sell the shares at that price. The result is 17.65 percent profit. Importantly, the trade can be closed at any time prior to expiration and, if the calls are not assigned at or before expiration, the strategist can sell calls in a more distant expiration month or close the position by selling the shares at the prevailing market price.

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First Solar Inc (FSLR) $111.97 -1.94%

2/8/2010 11:20:04 AM

First Solar shares $3.40 to $110.80 notable transaction looks to be a three way trade in which the initially sold 1,650 March $105/$80 puts spreads traded on CBOE (now 2,300) followed by the purchase of 1,500 of the March $140 calls on PHLX. All could be closing as open interest is sufficient to cover. Shares have declined some 20% in the past month an are at minor support at the $110 level.

Read more at WhatsTrading.com

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Daily Rundown, February 8

2/8/2010 10:20:03 AM

Stocks are indicated modestly higher on a relatively slow news day Monday. Thirty minutes before the opening bell on Wall Street, stock index futures hint at modest early gains for both the Dow Jones Industrial Average and the NASDAQ.\n
\nTrading is mixed overseas before the opening bell on Wall Street. While Japans Nikkei lost 1.1 percent and Hong Kongs Hang Seng slipped .6 percent, a .7 percent gain in Germanys DAX is pacing a modest advance across Europe.\n
\nIn the US, the economic calendar is light this week until jobless claims and retail sales numbers Thursday.\n
\nWith little to guide the early action, bonds are lifeless in quiet trading Monday morning. The benchmark ten-year Treasury is down 2/32nd and now yields 3.57 percent.\n
\nThe dollar edged down .11 to 89.39 against the Japanese yen. The euro gained .0006 to 1.3670 an ounce.\n
\nCrude oil is flat near $71.25 a barrel, but gold jumped $14 to $1067 an ounce. \n
\nAmong the stocks to watch, Hasbro (HAS) and CVS are trading up on earnings news. Some of the fertilizer names, including Potash (POT) and Mosaic (MOS), are seeing early strength. Motorola (MOT) is trading up after being mentioned positively in Barrons. Home Depot (HD) might help the Dow early after Morgan Stanley upgraded the stock to Overweight.\n
\nNote: we had a little Internet issue this morning, which has been resolved. Sorry for any inconvenience this caused.

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More Options Commentaries and Observations by Schaeffer�s

Buyout Chatter Sparks Bullish Speculation on Research In Motion Limited

BlackBerry maker Research In Motion Limited (RIMM: sentiment, chart, options) was the target of heavy call volume yesterday, with activity rising to 1.40 times the usual level. During the course of the session, traders on the International Securities Exchange (ISE) bought to open 2,900 calls on RIMM, compared to just 1,810 puts. The stock netted a single-day ISE call/put volume ratio of 1.60, revealing a notable bias toward bullishly oriented options.

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Option Activity Alert: Calls Gain Popularity on Focus Media Holding Limited

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Options Strategy of the Day: Bearish Put Spreads

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Options Spotlight: NETGEAR Inc.

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