Friday Options Recap

Sentiment

Stock market averages are lower, but well off their worst levels of the day. With no economic data on the docket, some of the focus has been on steep losses in shares of Gap Stores (GPS) and Aeropostale (ARO), which are down 16.8% and 15.2%, respectively, on earnings news. Meanwhile, the euro is under pressure and trading down .7% against the buck amid ongoing worries about Greek debt problems. However, a rebound in crude oil and gold has given a lift to some of the commodity-related names. Crude oil is up $1.21 to $100.14 and gold gained $21.1 to $1,513.50 an ounce. The Dow Jones Industrial Average is down 40 points, but almost 80 points off session lows. The tech-heavy NASDAQ lost 7.1. CBOE Volatility Index (.VIX) added .90 points to 16.43. Trading is active because it’s options expiration Friday: 7.6 million puts and 7.3 million calls traded so far.

Bullish Flow

Cheniere Energy (LNG) sees a surge to $11.11 per share beginning just before 14:00 ET. Shares of the Houston-based natural gas company are now up $2.25 to $9.94 on news the DOE has approved and authorized the export of natural gas as LNG to any country that has the capacity to import LNG. Options volume is picking up in Cheniere as well. 22,000 calls and 2,505 puts so far. The expiring May 10 calls are the most actives. 3,330 traded. May 9, May 11, Jun 9, Jun 11, Dec 10 and Dec 15 calls are seeing interest as well. CQP also higher on the news. Interestingly, LNG Sep 12 calls saw large purchases in mid-April. The action was noteworthy because the contract was 54.8% out-of-the-money and trading at 80 cents (see 4/14 color). It's now bid at $1.10.

Market Vectors Gold Mining ETF (GDX) loses 70 cents to $54.90 and the May – Jun 55 call fly trades at $1.59, 2340X on ISE. Looks like a roll of at-the-money calls ahead of the expiration and has been repeated multiple times. Volume in both contracts is now more than 10,000. The May 55s, which are now ten cents OTM, traded at 48 cents early and are now bid at 22 cents. GDX hasn’t performed well lately due to a recent correction in the gold market. Shares are down 11.7% month-to-date.

Bearish Flow

American Eagle (AEO) is down $1 to $13.62 and puts are active in the retailer after peer Aeropostale shares lost 15% on an earnings miss. Gap is also reeling on earnings news. In American Eagle options action, June 14 puts are the most actives. 5,139 traded (55% Ask) against open interest of 5,155. Similar action in the Jun 13 puts. Jun 14 and 15 calls are busy as well. Implied volatility is tp 13% to 46.5, as investors now set sights on American Eagle’s May 25 (before market) earnings report.

Implied Volatility Mover

Brocade (BRCD) adds 36 cents to $6.62 and options on the chipmaker are actively traded today after the company reported second quarter earnings that topped Street expectations. 23,000 calls and 4,900 puts traded in Brocade so far. The top trade is a 4,283-contract block of Jul 7 calls at 29 cents when the market was 27 to 30 cents and is possibly a buyer looking for a run beyond $7 through the July expiration. Shares have already risen 14.7% over the past month. May 6, Jun 6, and Jun 7 calls are seeing active trading as well. Implied volatility has eased 21% to 40.

Unusual Volume Movers

Bullish flow detected in Guess (GES), with 4445 calls trading, or 7x the recent avg daily call volume in the name.

Bullish flow detected in CF, with 15857 calls trading, or 3x the recent avg daily call volume in the name.

Bullish flow detected in MAKO, with 9656 calls trading, or 3x the recent avg daily call volume in the name.

Increasing volume is also being seen in Salesforce.com (CRM), Sprint (S), and Corning (GLW).