Monday Options Recap

Stock market averages fell in morning trading, but are well off session lows late Monday. Concerns about the debt crisis are weighing on Wall Street after Greece failed to reach an agreement with creditors over the weekend. The domestic economic news wasn’t stellar either after data showed Personal Spending unchanged in December. Economists were looking for a .1 percent increase. Yet, a sell-off never materialized and market averages had recovered much of their losses through midday. Since then, trading has been rangebound. The Dow Jones Industrial Average is down 25 points, but 95 points off session lows. The NASDAQ has pared its loss to only 7 points. CBOE Volatility Index (.VIX) hit a high of 20.33 and was recently up .92 to 19.45. Overall options volume doesn’t impress. With about an hour left to trade, 5.5 million calls and 5 million puts have traded across the options exchanges.

Bullish Flow

MGM (MGM) loses 17 cents to $13.02 and options trades on the casino operator Monday morning include a Feb 13 – Mar 14 call spread, apparently sold at a penny, 12000X. Looks like Feb calls were sold at 47 cents to close positions opened earlier this month. For instance, on Jan 9, 4500 were bought for 21 cents each. Shares are up 14.4 percent since that time and, while the Feb 13s are at-the-money, a new bullish position is being opened in MGM’s out-of-the-money Mar 14 calls for 46 cents per contract. Earnings will come into play on Feb 22, outside of the Feb 18 expiration.

PowerShares Ag Fund (DBA) loses 39 cents to $28.81 and one player bought 6,500 April 30 calls on the ETF for 55 cents per contract. 6,570 now traded against 6,005 in open interest. DBA is on a three-day 1.8 percent losing skid and now down 15.6 percent since August. Today’s call buyer is possibly anticipating a rebound to more than $30 (~4.1%) through the April expiration (81 days). DBA is a fund designed to track corn, wheat and other agricultural commodities.

Bearish Flow

SPDR Retail Trust (XRT) loses 18 cents to $55.63 and a Feb 51 – 53 put spread is bought on the ETF for 21 cents, 5000X. It’s possibly a hedge ahead of Thursday’s monthly Same Store sales results.

Implied Volatility Mover

RenRen (RENN) jumps 73 cents to $5.98 on volume of 8.9 million shares, which is almost twice the daily average volume for the Chinese Internet company. RenRen is on a two-day 43.3 percent surge amid heavy trading in both the underlying and the options. 10,000 calls and 2,620 puts already traded on the stock today. Feb 6 calls, which are almost at-the-money with 18 days of life remaining, are the most actives. 5,060 traded. Feb 5 and Mar 6 calls are the next most actives and implied volatility is up 25 percent and elevated at 126. The stock jumped Friday on the Facebook IPO headlines. Earnings expected around Feb 9.

Unusual Volume Movers

Bullish flow detected in Nabors Industries (NBR), with 12032 calls trading, or 2x the recent average daily call volume in the name.

Bearish activity detected in Pitney Bowes (PBI), with 5925 puts trading, or 3x the recent average daily put volume in the name.

Bullish flow detected in Eli Lilly (LLY), with 35332 calls trading, or 3x the recent average daily call volume in the name.

Meanwhile, unusually high options volume is being seen in Pep Boys (PBY), Green Mountain Coffee Roasters (GMCR), and Starbuck’s (SBUX).