The start of earnings season (and some fireworks in Herbalife (HLF)) dominated the attention of many traders yesterday, but several names showed up notably bullish flow, suggesting a view that traders may be looking for a very good start to the year for these listed stocks.
Vera Bradley (VRA) saw near record call volume on Wednesday, with 3100 contracts trading and a call to put ratio over 11, as shares lifted $0.16 to close at $24 and IV lifted several points to the 50% level for the near-term options. The catalyst is unclear, and some of the flow was a closing buyer of January 22 calls and January 25 calls followed suit, for the busiest day since the last earnings release.
Facebook (FB) is near the best levels since July in front of a scheduled press event next week. Share price shows optimism as it lifted past $30 on heavy turnover of 73 million shares, while the options sentiment seems equally bullish as 385,000 calls and 138,000 puts traded on FB on Wednesday. January 30 calls and January Weekly 30 calls were the most active, with nearly 58,000 trading between the two contracts.
Tyco (TYC) calls were unusually active early Wednesday, with implied vol lifting and skew flattening (ie, upside calls gained in price more than downside puts), as a few aggressive sweeps were used just eight minutes into the day to buy 30 and 31 strike calls in July. On Tuesday the flow was more bearish, with a buyer of 6500 July 27 puts for $1.18 compared to a $29.66 stock. Earnings are due on January 29.
CBS (CBS) options were five times as busy as normal on Wednesday, with 15,000 calls trading (vs. 1000 puts!) and 2.8% out of the money February 39 calls drove the action. 13,000 traded at an average price near $0.90, suggesting shares may have a shot at breaking the 52-week closing high set on the first trading day of the year.
Cliffs Natural Resources (CLF) (iron ore, not energy bars) was another name with unusually heavy call volume on Wednesday and rising implied volatility. January 38 calls with 10 days left to trade were the most active, with 5360 contracts trading at an average price of $0.99. Shares slid later in the day, to close at $37.35, so this buyer would need a pretty hefty move to break-even from this point.
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