Earlier in the session I noted a tendency among option traders -- perhaps tapping their toes and twiddling their thumbs at the lack of firm directional activity in the options market -- to sell volatility wherever possible. Another example of that kind of thinking surfaced late in the trading session in shares of the Internet HOLDRs Trust (HHH - commentary - Cramer's Take), the ETF whose components include Amazon.com (AMZN - commentary - Cramer's Take), eBay (EBAY - commentary - Cramer's Take) and Yahoo! (YHOO - commentary - Cramer's Take). While the per-share price of the fund is showing a 2.1% downtick from Friday's closing level to $32.81, implied volatility in its options is sitting steady at a 21-percentage-point premium to the historic reading on the stock price -- a premium that has remained fairly constant for the past month. Option traders have finally opted to sell that volatility via the January 35 straddle, taking a rich $7 credit, or more than 20% of the current share price. Activity here represented more than 16 times the normal level of activity in this infrequently traded equity fund.
Unusual front-month call activity in excess of open interest also surfaced in Amgen (AMGN - commentary - Cramer's Take) options this afternoon -- this occurred as shares read 2.4% higher at $61.30, trending higher amid heavy call volume with other biotech/stem-cell companies ahead of the vote. November 65 Amgen calls are trading at more than triple the open interest at about 92 cents a contract. This volume is being logged to the middle of the market, so we cannot confirm whether the volume here is being bought or sold.
Shares in General Electric (GE - commentary - Cramer's Take), meanwhile, are down about 1.2% at $19.28, but the big options story today is happening in December 20-strike calls, these moving at more than triple the open interest. These contracts are attracting buyers and sellers today, ahead of an appearance at the Goldman Sachs Global Industrials Conference later this week (this per Trade Alerts), and possibly in some pre-election jockeying. Despite the preponderance of volume at this strike, roughly half the total volume in GE options today weighs in on the bearish side of the sentiment line, consistent with the tendency among many option players to sell premium wherever possible ahead of the election.
P.S. Will you be there when Cramer makes his next move?
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At the time of publication, Darst had no positions in the stocks mentioned.
Rebecca Engmann Darst is the Portfolio Manager for TheStreet.com?s Options Alerts Portfolio newsletter and an equity options analyst for RealMoney Each Thursday at 6:30 a.m. EST, she delivers the early-morning lowdown on option volume and sector trends on CNBC's "Squawk Box."
Prior to her work in the equity options market, she spent seven years in Scandinavia as a Copenhagen-based chief reporter for a European Commission news service, correspondent for Spanish daily El Mundo and Radio Netherlands, followed by stints at Nordea Bank and Saxo Bank.
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