Citi Dominates Options Trading

Your daily option s trading wrap up. Sentiment Stock market averages fell
Thursday morning after another big quake north of Tokyo, but the knee-jerk
reaction was short-lived and trading is orderly heading into the final hour.
Economic data was in focus before the opening bell after the Labor Department
reported that weekly jobless claims declined by 10,000 to 382,000 in the period
ended April 2. Economists had predicted a decline of 6,000. Meanwhile, Bed, Beth
and Beyond (NASDAQ: BBBY ) helped the Nasdaq 100 in early action after the
retailer reported better-than-expected earnings late-Wednesday. Costco (NASDAQ:
COST ) was the second best gainer in the Nasdaq 100 after the reporting strong
March same store sales numbers. JC Penney (NYSE: JCP ), Limited Brands (NYSE:
LTD ) and Macy's (NYSE: M ) were among the other retail winners. However, the
Japan quake triggered tsunami warnings and the Dow Jones Industrial Average
traded down more than 100 points from session highs. The situation had
stabilized by midday and the Dow is now down 45 points. The tech-heavy NASDAQ
lost 6 points. The CBOE Volatility Index (CBOE: VIX ) rallied to 17.77 and is
now up .34 to 17.24. Trading in the options market is not very active, with 6.7
million calls and 5.8 million puts traded. Bullish Flow Citigroup (NYSE: C )
April 4.5 Calls are the most actively traded options contract for a second day.
141,829 traded yesterday and open interest increased by 5380 contracts to
757,265. Today, shares have added 7 cents to $4.66 and 87,340 more have changed
hands. 36% traded on the bid and 59% at the ask, as there seems to be a mix of
opening and closing activity happening in the contract. The April 4.5 call is
now 16 cents in-the-money and has fewer than seven trading days of life
remaining. Citi will report earnings on April 18, after the April expiration. A
10-for-1 reverse stock split happens on May 6. There's been a lot of interest
in Citigroup options ahead of these events. Today, for example, the five most
actively traded equity options are the Citi April 4.5 calls, June 4, puts, May 5
calls, May 4.5 calls and April 4.5 puts. Find more option analysis and trading
ideas at Options Trading Strategies . Bearish Flow Wal-Mart (NYSE: WMT ) loses 7
cents to $52.91 and is one of 29 Dow stocks heading lower Thursday morning.
Meanwhile, in options action, a noteworthy trade is a WMT May 52.5 – 55
Strangle , bought at $1.30, 8000 times. The position was tied to 192,000 shares
at $53.05 and appears to be an opening play a bet that shares of the world's
largest retailer will see increasing volatility over the next 43 days. WMT,
which stopped reporting monthly same store sales numbers, fell 3.1% on Feb. 22
after earnings were reported and fell another 4% in the weeks that followed.
However, the stock is up 3.1% since March 17. Yahoo (NASDAQ: YHOO ) loses 9
cents to $16.96 and one investor sells 10,000 YHOO April 17 Calls to buy 20,000
YHOO April 16 Puts , collecting 14 cents on the bearish (1X2) risk-reversal. The
position was tied to 700.000 shares at $16.94. It comes after a 5.9% gain in
shares since March 17 and possibly closes a bullish position. Or, it might be a
bearish play ahead of next week's expiration. No news on the stock today.
Yahoo is due to report results after market on April 19, which is the Tuesday
after the April contracts come off the board. Implied Volatility Mover Rare
Element Resources (AMEX: REE ) is leading the sector to higher ground Thursday
on reports the U.S. might respond to Chinas recently announced plans to
stockpile rare earth materials by initiating a stockpiling of its own. REE is up
16.2% to $15.27 and heading to session highs. Options action is brisk, with
23,000 calls and 11,000 puts traded in Rare Element so far. Most of the action
has been smaller lots. The top trade is a REE April 12.5 14 Put Spread ,
apparently bought at 60 cents, 500 times. April 14 and 15 calls are the most
actives, with 3520 and 4800 traded, respectively. Investors seem to be taking
positions in the front-month April options and anticipating additional action in
REE tomorrow and the rest of next week before expiration. Implied volatility is
up 7.5% to 80. Avalon Rare Metals (AMEX: AVL ) and Molycorp (NYSE: MCP ) are
seeing relative strength as well. The Market Vectors Rare Earth ETF (NYSE: REMX
) is up 2.1%. Options Flow Bullish flow detected in Charles Schwab (NYSE: SCHW
), with 4228 calls trading, or three times its recent average daily call volume.
Bearish activity detected in Simon Property Group (NYSE: SPG ), with 8296 puts
trading, or seven times its recent average daily put volume. Bullish flow
detected in Hertz Global (NYSE: HTZ ), with 6390 calls trading, or eight times
its recent average daily call volume. Increasing volume is also being seen in
National Semi (NYSE: NSM ), TiVo (NASDAQ: TIVO ), and AMR (NYSE: AMR ). Frederic
Ruffy is the Senior Options Strategist at Whatstrading.com , a site dedicated to
helping traders make sense of the complex and fragmented nature of listed
options trading.