Tech SPDRs, Micron Spur Options Trading

The options market update, posted one hour before the close on Wednesday, January 12, 2011 by Frederic Ruffy. Bullish flow detected in China MediaExpress (NASDAQ: CCME ), with 4888 calls trading, or two times the recent average daily call volume. Bullish flow detected in Kimberly-Clark Corp. (NYSE: KMB ), with 8112 calls trading, or five times the recent average daily call volume. Bearish activity detected in Northrop Grumman (NYSE: NOC ), with 2207 puts trading, or four times the recent average daily put volume in the name. Increasing volume is also being seen in NVidia (NASDAQ: NVDA ), Walmart (NYSE: WMT), and Monsanto (NYSE: MON ). Sentiment The table was set for morning gains on Wall Street after stock market averages moved broadly higher across the Euro-zone. Spain's IBEX index rallied 5.4% on news of a successful bond auction in Portugal. In the U.S., the financials rallied and an hour before the close Bank of America (NYSE: BAC ) and JP Morgan (NYSE: JPM ) are leading the Dow Jones Industrial Average to an 85-point gain. Exxon (NYSE: XOM ) and Chevron (NYSE: CVX ) are also helping the Dow after crude oil settled just shy of $92 a barrel. Agricultural commodities are also rallying after the USDA released a bullish crop report Wednesday morning. Meanwhile, the tech-heavy NASDAQ is up 17.5 points. With less than an hour to trade, the CBOE Volatility Index ( .VIX ) is down .41 to 16.48. Trading in the options market is active and reflects the bullish underlying tone, with 8 million calls and 5.6 million puts traded so far. Bullish Flow Technology Select Sector SPDR (NYSE: XLK ) touches a new 52-week high and is up 20 cents to $25.93 and one investor buys-to-open a block of 100,000 XLK January 26 Calls at 21 cents each. The position, which appears opening, is a short-term play. January options expire at the end of next week and markets are closed Monday for the holiday. After today, only six trading days remaining before the January expiration. It might be a play on the recent momentum in the tech sector and or earnings from Intel (NASDAQ: INTC) Thursday afternoon. Micron Technology (NASDAQ: MU ) shares are rallying and call volume is surging. Shares are up 56 cents to $9.28 and 65,000 contracts traded on the chipmaker. MU Feb 9 and 10 Calls are seeing brisk trading, driven predominately by buyers, as more than two-thirds trading at the asking price. Some investors might be liquidating positions in Jan 9 calls, which have traded 15,900 times (59% on the bid). Implied volatility (IV) is up 2.5% to 42. No news on the stock today, but note that the company is presenting at a Needham Growth Conference and MU was also the subject of bullish activity two days ago. Bearish Flow The top trades of the day recently surfaced in the SPYders SPDR S&P 500 (NYSE: SPY ) and are part of a put fly, in which the investor sold 80,000 SPY Feb 121 Puts at 60 cents to buy 40,000 SPY Feb 116 Puts at 26 cents and buy 40,000 SPY Feb 126 Puts at $1.47. This fly, for a net debit of 53 cents, is likely a short-term hedge. With shares up $1.15 to $128.58, this spread offers a max pay-off if shares fall to $121 (5.9% by the Feb expiration (37 days to go). Implied Volatility Mover PMC-Sierra (NASDAQ: PMCS ) adds 19 cents to $9 per share and speculative buyers surfaced in the name Wednesday morning. The  PMCS Jan $9 Calls are the most active with 2600 traded (76% ask) vs. 553 in open interest. Looks like opening buyers in Jan $10 calls as well. In total, 5,150 calls and 100 puts traded on the chipmaker through midday. Implied volatility jumped 13.5% to 42. Author Frederic Ruffy is a well-known trader, writer, and strategist who has spent years educating investors and creating intelligent, insightful, unbiased market observations that are frequently cited by the Wall Street Journal and other financial publications.
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