With S&P Futures up 18 points (1%) the broad market appears set to end a five-day losing streak this morning, and after seeing diminishing volume during the second half of November we see trading activity across the options market has picked up in the start of December. The recent pause in the broad market rally is a good thing for stock pickers, because option order flow in individual names becomes can be a clear 'tell' in terms of bullish and bearish picks of the larger institutions. The following names saw noteworthy bullish flow yesterday. Here are five.
Activity picked up in the telecom sector. AT&T (T) led the early action, with buyer paying an average price of $0.179 per contract for nearly 35,000 Dec 35 calls on the stock. Shares finished the day down $0.35 to $34.25 and the contract is $0.75 out-of-the-money and expiring in two weeks. Open interest numbers confirm that the position was opening and, as we can see from the chart below, 30-day vols in AT&T were moving higher as well.
Not to be outdone, options volume in Verizon (VZ) was 2X the daily average yesterday, with most of the flow surfacing early in the session. About 25,000 contracts traded (5x normal) in first hour and calls led puts by a ratio of 3:1. The activity featured a few high-delta sweep call buyers in the January 44 and 46 strikes when shares were near $48.50. 30-day implied volatility was up 5.5% to 16.
Elsewhere, Broadcom (BRCM) saw higher call volume. The stock was up 44 cents to $27.50 amid strength in the iPhone suppliers (SWKS, AVGO, CRUS, etc) on reports Apple inked a deal with China Mobile. On the options front, about 63,000 calls and 15,000 puts traded on Broadcom yesterday, which was 4X the daily average. Weekly 28 calls, which are $0.50 out-of-the-money and expiring after today, saw the biggest increase in open interest. The stock is up to $27.70 in pre-market Friday morning.
Meanwhile, Hertz (HTZ) was up $0.12 to $24.29 in morning trading and a sweep of 3030 Jan 26 calls traded on the auto rental company for $0.55 when the market was $0.40 to $0.55. At the end of the end of the day, more than 8,400 contracts traded and the flow created nearly 6,000 in open interest in that strike. The morning activity was later highlighted on CNBC yesterday. HTZ finished hit an afternoon high of $24.62 and closed at $24.44 per share.
Lastly, Abercrombie & Fitch (ANF) calls were busy. The stock was down 13 cents to $35.37 on the heels of disappointing earnings from Aeropostale (ARO). Early options action on the stock Thursday included a sweep of 1,261 Weekly 38 calls for $0.72 followed by another 2,691 for $0.74 when the market was $0.62 to $0.74. More than 5,000 contracts traded on the day and the flow created 4,669 in open interest. The stock might again see a bit of weakness today after American Eagle (AEO) posted disappointing earnings this morning. However, a brokerage firm had a note on ANF Wednesday highlighting the company as a possible private equity play and expects a Feb deadline for the existing CEO to be a catalyst for the stock. The focus in the options market yesterday was on ANF options that expire on January 3.
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