Options Intelligence Report

As of: Wed, 4 Nov 2009 02:32 PM EST

As of: Wednesday November 4, 2009 12:50 pm EST

Dollar bulls power-up with ETF index call options ahead of FOMC

Today’s tickers: UUP, NWL, HNZ, EWZ, UNH, OSTK & STEC

UUP - PowerShares DB U.S. Dollar Index Fund – There was huge volume today in this exchange traded fund that tracks the American dollar’s index value ahead of this afternoon’s FOMC statement, which is likely to leave monetary policy unchanged and point to an ongoing situation in which interest rates remain accommodative for as long as the eye can see. Such an outlook for the dollar at a time of modest recovery has created a weak fundamental backdrop for the greenback. So today’s 155,000 call options bought for tiny premiums ranging between 10-15 cents per contract smacks of a large institution placing a sizeable gamble that change might be in the air either in what the Fed says this afternoon or for a more general change of heart towards the dollar before expiration on November 20. The dollar index on which this ETF is based is lower today and close to its weakest point in the current environment. With the price of the fund trading at $22.54, the investor needs to see a dollar rally lift the index and boost the price of the ETF beyond $23.15 by expiration in order to not lose money. A sharp turnaround in the fortune of the dollar today would automatically boost the index and therefore the value of this sizeable set of trades.

NWL - Newell Rubbermaid Inc. – Shares of the global marketer of consumer and commercial products edged 1% higher today to $14.28, but options activity on the stock suggests shares may continue to trend upward. Rubbermaid-bulls bought nearly 5,000 calls at the November 15 strike for an average premium of 34 cents apiece. Another 2,000 calls were coveted at the December 15 strike where investors shelled out 60 cents per contract. NWL’s shares were trading at around $15.50 on October 22, 2009, before the market buckled and sent the stock back down to $13.96. Apparently call-buying investors expect shares to rebound to at least the breakeven price of $15.60 by expiration in December. The sudden demand for options drove implied volatility 20% higher to the current reading of 48% -- the highest level since July 30, 2009.

HNZ - H.J. Heinz Company – A stampede of bullish investors flooded the November contract on the condiment company today as shares of the ketchup maker rallied 1.5% to $40.58. Traders scooped up approximately 6,000 call options at the November 41 strike for 44 cents premium apiece. The mad-dash for out-of-the-money calls suggests investors expect Heinz’s shares to continue on the up-and-up through expiration. Traders long the calls may amass profits if shares trade above the breakeven price of $41.44. The sharp increase in demand for HNZ calls boosted option implied volatility from an intraday low of 20% to a high of 22.62%.

EWZ - iShares MSCI Brazil Index ETF – A bearish butterfly spread was initiated in the December contract on the exchange-traded fund today despite the more than 2% rally in shares to $72.71. The lower wing of the spread was positioned at the December 60 strike where 10,000 puts were purchased for 1.02 apiece. The upper wing was placed at the December 70 strike where another 10,000 puts were bought for an average premium of 3.44 each. Finally, the central December 65 strike housed the body of the butterfly, which involved the sale of 20,000 puts for about 1.93 per contract. The net cost of the trade amounts to just 60 cents and provides maximum potential profits of 4.40 per contract if shares of the EWZ settle at $65.00 by expiration next month. The butterfly spread strategy allows the bearish investor to reduce potential risks and maximize potential profits. The investor has positioned the trade in such a way that he faces a reward-to-risk ratio of more than 7-to-1.

UNH - UnitedHealth Group, Inc. – More than 6,000 call options changed hands at the November 29 strike within the first 30 minutes of the trading session versus existing open interest at that strike of just 1,251 contracts. Perhaps option traders expect shares to rally above and beyond current gains of 5% to $28.28. We will be sure to keep an eye on options on UNH as well as activity on other health providers today.

OSTK - Overstock.com, Inc. – Shares of the online closeout retailer are trading 8.6% higher this morning to $15.78 following Tuesday’s earnings report. Overstock posted a narrower-than-expected loss of 3 cents per share for the third-quarter on 4% higher revenue of $195.1 million. Option implied volatility plunged 25% to 54%, a reading which is just 4% over OSTK’s two-year implied volatility low of approximately 50%. Approximately 1,000 option contracts traded on the stock as of 10:20 am (EDT).

STEC - STEC, Inc. – The maker of flash memory storage products suffered 35% declines in shares today to stand at the current price of $15.09. The stock plummeted on news EMC Corp., a key customer, will carry inventory from 2009 into 2010. Additional guidance from the firm revealed fourth-quarter revenue will likely come in below average analyst expectations of $106 million. Overall pessimism weighed heavily on shares and inspired a flurry of options activity in the November contract this morning.

• Gainers/Losers

  • Top Twenty Volatility Gainers and Losers

    The percent trading day's 30-day Implied Volatility is divided by the prior trading day's 30-day Implied Volatility to determine the change in volatility for the day and the top 20 gainers and losers are posted. Gainers are those symbols which the options markets believe will have the greatest up or down price movement in the future as compared to the past, and losers are those symbols which the options markets believe had a large up and down price movement and will stabilize in the future. Implied volatility, closing price, and change in price from the prior day are also displayed.

    • 30-day Implied Volatilities Gainers

      Underlying	Gain In Vol.	Imp Vol.	Last Price	Price Change
      JAVA	16.37%	49.05%	8.35	-0.06
      NWL	13.25%	46.08%	14.14	0.23
      CDNS	12.17%	53.99%	5.86	-0.02
      SWK	11.72%	31.78%	49.69	-1.06
      SWKS	11.06%	71.74%	10.41	-0.02
      BDK	10.58%	30.92%	62.00	-1.70
      L	10.05%	31.08%	34.19	-0.06
      AET	8.57%	51.16%	26.62	1.66
      HTE	8.05%	30.11%	9.28	0.00
      FMX	7.70%	48.45%	42.76	0.42
      NCR	6.64%	50.37%	9.90	0.13
      AUO	6.43%	44.15%	8.87	0.31
      COMS	5.79%	58.61%	5.30	-0.06
      KIM	5.64%	69.28%	12.97	-0.11
      PBCT	5.54%	28.64%	15.81	-0.09
      JNY	5.49%	62.04%	18.25	-0.89
      UNP	5.43%	39.23%	59.41	-0.28
      SAY	5.15%	74.96%	5.16	0.12
      UNH	4.77%	46.42%	26.91	1.03
      CAG	4.67%	23.73%	20.73	0.17

    • 30-day Implied Volatilities Losers

      Underlying	Loss In Vol.	Imp Vol.	Last Price	Price Change
      QSFT	-25.72%	30.38%	17.25	0.39
      MFA	-22.25%	27.51%	7.48	-0.30
      MYGN	-21.84%	46.91%	25.64	-0.77
      HLS	-20.78%	32.59%	15.73	0.97
      DLB	-20.17%	40.18%	44.18	-2.69
      PBI	-19.18%	29.81%	24.67	0.13
      INT	-17.56%	45.40%	52.12	-0.33
      TAP	-15.75%	26.54%	49.40	-3.67
      ONXX	-15.64%	47.64%	27.25	-0.96
      MMC	-15.56%	29.43%	23.37	-0.34
      TEL	-15.28%	36.30%	21.71	0.94
      KFT	-15.15%	21.72%	27.54	-0.88
      PBG	-14.15%	14.14%	37.23	0.11
      FIS	-13.75%	28.00%	22.02	-0.02
      WPI	-13.37%	28.42%	35.34	-0.36
      FWLT	-13.13%	54.93%	29.70	0.75
      DISCA	-13.04%	32.94%	28.01	0.97
      CBL	-12.85%	67.58%	8.22	-0.12
      CMCSK	-12.36%	40.97%	13.97	-0.38
      GRMN	-12.24%	57.20%	31.41	-4.18

• Implied vs. Historical Vols

  • Implied vs. Historical Volatilities

    The 30-day Implied Volatility is divided by the 30-day historical volatility. This ratio highlights those symbols in which the market prediction of future volatility is much different from the volatility in the market over the last 30 days. The formula for historical volatility as defined by Garman-Klass. The top twenty symbols with the highest ratios as well as the top twenty symbols with the lowest ratios are displayed.

    Implied volatility, historical volatility, closing price, and change in price from the prior day are also displayed.

    • Lowest Implied/Historical Volatilities

      Underlying	Imp/Hist	Imp Vol.	Hist Vol.	Last Price	Price Change
      BNI	0.12	9.24%	78.13%	97.00	0.00
      EAC	0.32	23.22%	73.07%	44.53	0.78
      HTE	0.34	30.11%	87.82%	9.28	0.01
      BDK	0.39	30.65%	78.25%	62.00	-1.71
      ACS	0.47	25.11%	53.67%	52.57	2.12
      STJ	0.58	30.49%	52.31%	34.61	-0.07
      HGSI	0.62	67.47%	108.15%	28.07	-1.50
      BIDU	0.63	42.83%	68.48%	383.04	3.00
      ILMN	0.63	41.08%	65.07%	32.84	-0.71
      TRA	0.68	33.08%	48.29%	34.88	0.69
      AMZN	0.70	42.51%	60.45%	118.37	-0.59
      MSFT	0.72	26.22%	36.59%	27.53	0.61
      WAG	0.72	26.81%	37.11%	38.44	1.01
      ORLY	0.74	31.76%	42.70%	37.45	0.19
      BSX	0.75	38.97%	51.81%	7.99	0.11
      AKAM	0.77	43.80%	57.13%	22.56	-0.05
      EL	0.77	33.92%	44.13%	44.66	0.18
      APOL	0.78	49.39%	63.28%	57.29	0.13
      NCR	0.79	50.37%	63.93%	9.90	0.13
      AMP	0.79	44.62%	56.40%	35.24	1.98

    • Highest Implied/Historical Volatilities

      Underlying	Imp/Hist	Imp Vol.	Hist Vol.	Last Price	Price Change
      OCR	2.11	49.64%	23.49%	21.94	0.61
      JAVA	1.96	49.02%	24.97%	8.35	-0.06
      CBY	1.92	34.91%	18.22%	51.21	-0.78
      CF	1.86	52.51%	28.30%	85.43	0.93
      WFMI	1.82	59.12%	32.51%	32.06	0.20
      ATVI	1.81	59.08%	32.59%	10.62	0.06
      KG	1.67	46.93%	28.03%	10.26	-0.08
      PALM	1.64	96.28%	58.61%	11.36	-0.57
      SNPS	1.63	30.35%	18.65%	22.04	0.62
      PCS	1.62	89.69%	55.32%	6.40	0.21
      GPS	1.58	43.26%	27.45%	21.94	0.16
      ADSK	1.57	48.53%	30.81%	25.23	0.23
      WMT	1.57	21.34%	13.59%	49.90	0.47
      CAH	1.57	31.86%	20.32%	28.66	0.72
      NUAN	1.56	49.85%	31.89%	13.55	0.06
      CHS	1.55	65.28%	42.05%	12.78	-0.24
      TIVO	1.55	77.59%	50.02%	10.44	-0.07
      KSS	1.55	39.07%	25.26%	56.71	0.17
      HOLX	1.53	50.93%	33.37%	14.64	0.45
      SH	1.51	25.32%	16.75%	56.52	-0.28

• Volatilities

  • Top Twenty 30-day (V30) Implied Volatilities

    Implied volatility is the options market's prediction of how volatile a given underlying will be in the future. Implied volatility is calculated by inputting all known information into an options pricing model (i.e. option price, interest rates, dividends, strike price, and expiry date) and backing out the implied volatility.

    Twenty symbols with the highest implied volatilities are ranked in descending order and displayed on an annualized basis. Implied volatility is calculated using a 100-step binary tree for American style options, and a Black-Scholes model for European style options. Interest rates are calculated using the settlement prices from the day's Eurodollar futures contracts, and dividends are based on historical payouts.

    The IB 30-day volatility (V30) is the at market volatility estimated for a maturity thirty calendar days forward of the current trading day. It is based on option prices from two consecutive expiration months. The first expiration month is that which has at least eight calendar days to run. The implied volatility is estimated for the eight options on the four closest to market strikes in each expiry. The implied volatilities are fit to a parabola as a function of the strike price for each expiry. The at-the-market implied volatility for an expiry is then taken to be the value of the fit parabola at the expected future price for the expiry. A linear interpolation (or extrapolation, as required) of the 30-day variance based on the squares of the at market volatilities is performed. V30 is then the square root of the estimated variance. If there is no first expiration month with less than sixty calendar days to run we do not calculate a V30.

    Closing price, and change in price from the prior day are also displayed.

    • 30-day Implied Volatilities

      Underlying	Imp Vol.	Last Price	Price Change
      AIB	120.76%	4.65	0.42
      IRE	118.79%	8.57	1.83
      AIG	110.22%	39.22	-3.16
      MGM	97.50%	9.65	-0.44
      PALM	96.29%	11.36	-0.58
      PCS	89.75%	6.40	0.19
      GCI	89.72%	10.54	-0.32
      MPEL	85.83%	5.15	-0.13
      UAUA	85.75%	6.64	-0.13
      AMR	85.53%	5.30	-0.07
      EJ	84.79%	17.84	0.96
      LVS	83.99%	15.14	-0.21
      LEAP	83.82%	13.87	0.24
      RRI	82.80%	5.38	-0.09
      YGE	82.71%	12.18	-0.40
      CDE	82.12%	22.20	-0.25
      MTL	79.86%	18.25	0.38
      STP	79.72%	12.71	-0.30
      GNW	79.71%	10.87	-0.51
      ING	79.69%	13.10	0.22

• Volumes

  • Top Twenty Options Volumes and Volumes Gainers

    Options volumes for the day are displayed for the top twenty symbols with the highest volumes.

    The trading day's options volumes are divided by the previous ten trading day's options volumes average and the top twenty gainers are posted by symbol.

    Closing price, and change in price from the prior day are also displayed.

    • Top Twenty Options Volumes

      Underlying	Volume	Last Price	Price Change
      BAC	330.5K	14.80	0.11
      QQQQ	326.2K	41.26	0.20
      CSCO	160.4K	22.91	0.26
      AAPL	147.3K	188.75	3.35
      GE	102.9K	14.32	-0.06
      F	89.9K	7.44	-0.12
      INTC	84.1K	18.50	0.11
      RIMM	82.3K	59.61	-1.99
      AET	82.2K	26.62	1.68
      AIG	82.1K	39.22	-3.12
      FCX	77.8K	76.78	1.05
      JPM	73.8K	42.70	0.00
      QCOM	72.2K	42.22	-0.34
      MGM	71.7K	9.65	-0.43
      DE	66.3K	47.21	-0.42
      GS	63.5K	171.61	-1.34
      UNH	55.9K	26.91	1.04
      GRMN	53.3K	31.41	-4.22
      DTV	47.9K	26.47	0.34
      MSFT	46.5K	27.53	0.61

    • Top Twenty Options Volumes Gainers

      Underlying	Volume Gain	Imp Vol.	Last Price	Price Change
      MFA	25.52%	27.51%	7.48	-0.32
      HNZ	13.79%	21.68%	39.97	0.62
      DTV	7.53%	38.62%	26.47	0.33
      WCG	6.70%	58.53%	26.32	1.99
      CBG	6.19%	66.66%	10.78	-0.28
      AET	6.19%	51.16%	26.62	1.66
      NWL	6.04%	46.08%	14.14	0.23
      CNW	5.85%	0.00%	32.62	-2.96
      BNI	5.70%	9.16%	97.00	-0.01
      BVF	5.07%	42.21%	13.34	-0.11
      GRMN	4.60%	57.20%	31.41	-4.15
      XEC	4.43%	45.19%	42.29	1.17
      PENN	4.42%	47.54%	26.20	1.86
      ALL	4.13%	45.78%	29.74	0.05
      SPLS	3.92%	34.94%	21.89	-0.09
      CAH	3.78%	31.86%	28.66	0.72
      JBHT	3.54%	40.75%	31.82	-0.11
      VRSN	3.40%	46.16%	22.96	0.19
      RRI	3.18%	82.80%	5.38	-0.08
      DE	3.07%	42.83%	47.21	-0.40

• Put & Call Ratios

  • Top Twenty Put/Call Volumes and Call/Put Ratio Volumes

    Put option volumes are divided by call option volumes for the trading day, and the symbols for the twenty highest ratios are displayed. For the put/call ratio, the HIGHER the value, the more negative the sentiment since it would indicate more puts traded than calls. A ratio of less than one indicates more call volume than put volume.

    Call option volumes are divided by put option volumes for the trading day, and the symbols for the twenty highest ratios are displayed. For the call/put ratio, the HIGHER the value, the more positive the sentiment since it would indicate fewer puts trading than calls. A ratio of less than one indicates more put volume than call volume.

    Closing price, and change in price from the prior day are also displayed.

    • Call/Put Volumes

      Underlying	Ratio	Imp Vol.	Last Price	Price Change
      CPN	208.33	54.01%	10.83	0.02
      CEG	158.73	34.50%	31.57	0.40
      HRB	158.73	34.62%	18.33	-0.11
      CYH	88.50	43.19%	33.06	0.10
      SPLS	85.47	34.75%	21.89	-0.04
      NCR	84.03	50.37%	9.90	0.14
      NWL	81.30	47.26%	14.14	0.29
      PDE	80.65	48.91%	30.97	-0.30
      VMED	57.14	50.50%	14.35	0.20
      DISH	48.31	55.40%	17.37	0.25
      SLE	44.44	39.69%	11.35	0.02
      CCE	40.16	29.32%	18.99	0.15
      GFI	39.53	58.07%	14.01	-0.36
      ALTR	39.22	36.02%	19.61	0.24
      XCO	38.17	64.63%	16.61	0.13
      NUAN	37.31	49.86%	13.55	0.09
      IVN	35.34	65.12%	11.09	0.48
      PVX	34.48	48.51%	6.43	0.10
      UFS	34.01	58.51%	47.07	-0.50
      RX	32.57	40.02%	16.93	0.02

    • Put/Call Volumes

      Underlying	Ratio	Imp Vol.	Last Price	Price Change
      CBG	866.29	66.66%	10.78	-0.23
      AOC	482.50	26.11%	38.54	0.41
      IACI	164.20	28.75%	19.05	-0.05
      CS	41.27	45.51%	53.96	-0.47
      LIFE	23.77	33.00%	48.10	0.06
      TCB	23.60	52.50%	11.65	-0.01
      FNF	22.41	42.31%	13.65	-0.06
      NRG	18.09	42.45%	23.28	0.45
      DE	16.29	42.85%	47.21	-0.24
      SLT	12.84	65.40%	15.69	0.85
      PCAR	12.39	40.02%	37.78	0.03
      JNS	12.20	57.43%	13.22	-0.01
      NOC	11.84	26.59%	50.12	0.47
      CA	10.00	35.07%	20.92	0.11
      EAT	9.57	50.08%	13.06	0.08
      DDR	9.38	77.52%	8.21	-0.01
      JEF	8.47	47.00%	27.08	-0.79
      PTV	8.38	36.65%	23.13	-0.08
      LYG	6.55	69.29%	5.72	-0.17
      JBL	5.97	47.93%	13.54	0.20

• Put & Call Interests

  • Top Twenty Put/Call Open Interest and Call/Put Open Interest

    Put option open interest is divided by call option open interest, and displayed for the top twenty symbols with the highest ratios. This ratio may indicate negative sentiment in the options market.

    Call option open interest is divided by put option open interest, and are displayed for the top twenty symbols with the highest ratios. This ratio may indicate positive sentiment in the options market.

    Open Interest ratios reflect a longer time period than Put/Call and Call/Put daily volume ratios and therefore tend to be less volatile.

    Closing price, and change in price from the prior day are also displayed.

    • Call/Put Open Interest

      Underlying	Ratio	Imp Vol.	Last Price	Price Change
      LMDIA	11.14	34.02%	30.99	0.33
      MFA	8.67	28.89%	7.48	-0.30
      SH	6.70	25.32%	56.52	-0.32
      FTR	6.58	27.26%	7.20	-0.01
      FLEX	5.90	52.89%	6.72	0.03
      GFI	5.75	57.26%	14.01	-0.36
      TNE	5.25	38.77%	19.33	1.06
      RX	5.13	39.88%	16.93	0.01
      LEAP	4.68	84.66%	13.87	0.29
      BEXP	4.65	71.75%	10.34	0.11
      WYN	4.28	54.88%	17.39	-0.15
      TSM	4.22	31.43%	9.51	0.16
      HNT	4.05	50.61%	16.09	1.07
      EGO	3.85	58.66%	12.11	0.01
      PBCT	3.76	28.67%	15.81	-0.08
      FMX	3.76	48.43%	42.76	0.42
      HCP	3.74	41.92%	29.68	-0.78
      CF	3.63	52.51%	85.43	1.01
      LSI	3.63	48.43%	4.99	0.06
      VIA B	3.51	36.91%	28.68	0.27

    • Put/Call Open Interest

      Underlying	Ratio	Imp Vol.	Last Price	Price Change
      RGC	4.37	37.81%	12.76	0.03
      SBAC	3.10	40.00%	28.97	-0.08
      HTZ	2.93	69.96%	9.11	-0.09
      IACI	2.69	28.75%	19.05	-0.04
      WERN	2.68	32.62%	18.68	0.02
      REG	2.52	50.29%	33.83	0.35
      HLS	2.46	32.59%	15.73	1.01
      MCO	2.46	55.21%	23.06	0.44
      CAT	2.45	42.56%	56.46	0.11
      PMCS	2.29	39.43%	8.59	0.13
      ORI	2.27	36.45%	10.77	0.11
      CCI	2.24	36.88%	31.59	1.13
      PNC	2.12	50.61%	51.97	-0.64
      OMC	2.08	31.13%	35.05	-0.19
      ITUB	2.03	44.65%	20.38	0.56
      CYH	1.98	43.19%	33.06	0.17
      SLG	1.94	64.20%	38.23	0.61
      MAC	1.89	67.26%	30.54	0.00
      AINV	1.87	45.72%	8.81	0.09
      RDC	1.85	52.94%	24.83	-0.11

The IB Options Intelligence Report presents vital market information that is extremely useful to serious traders based on Interactive Brokers Group's experience of professionally trading the markets for nearly three decades. Option pricing data has built-in information that provides the option markets' consensus outlook for future activity in the markets. These leading indicators can provide a guide to traders and investors before news is widely disseminated to the public at large or reflected in underlying prices.

The most important of these indicators, implied volatility, represents the markets' view of uncertainty associated with future price movements. When the current implied volatility is compared to the prior day's implied volatility, a large increase can foretell unexpected news developments and provide an opportunity to adjust positions accordingly. This gain indicates that option market participants anticipate greater price movement than in the past, possibly because of information that is not yet readily available. Conversely a large decrease in implied volatility indicates the expectation of subsiding price movements, possibly because all recent news has been reflected in current underlying prices. Large premium or discount of implied volatility to historical volatility over the past 30 days is frequently not justified and may represent significant trading opportunities. Other options market data presented in our report such as volumes, and call/put ratios also plays a role in understanding sentiment in the markets.

For the purpose of the tables, those symbols with less than a $5 stock price, and less than 200 options contracts traded, and whose company has less than $1 billion in capital are screened out to eliminate symbols whose information may be more indicative of lack of liquidity in the markets. All tables are posted every trading day on the hour from 12:00 to 16:00 ET under normal circumstances. To view volatility and volume as well as other market summary statistics in real-time within our premier direct access trading platform, Trader Workstation, you must have an account with Interactive Brokers.