Mid-day Flow Summary

---

It's a relatively busy morning in the options markets today. As expected, Yahoo and Alcoa are among the most actives:

Yahoo Inc (YHOO)
Without any significant deal news today, traders have focused on adjusting their positions to set up for a longer term deal horizon. That includes selling those YHOO options that saw the largest implied volatility spike last week.

Today's most popular trade is the October 27.5 put versus 32.5 call risk reversal, which traded 15,000 times on the Amex for $.90. This trade provides a cheap long position if the stock moves significantly from its current $30 range.

ADVERTISEMENT
Alcoa and Alcan (AA, AL)
Alcoa options are trading at four times their usual volume as merger-arb players analyze the deal and build positions. AA is trading up 6% to near $38, and the May 37.5 calls have been aggressively sold from $0.70 to $1.50 as the stock has rallied. 

We are also seeing sizable buyers in Jan-08 35-45 call spread for a net price of $4.73 on the CBOE as well as outright buyers of the October 40 calls. The longer-term upside buyers are most likely counting on the deal to go through without major hurdles, providing swift bottom line results to Alcoa.

Alcan is also trading at above average levels of volume this morning with 6700 contracts traded and the stock up $20 to nearly $81. We are seeing the most activity in the May and June 65 strikes, which are now deep in-the-money.

Notably, Friday saw more than 1300 of the May 65 calls purchased for $.20 around mid-day, creating new open interest at the strike and paying off well for the buyer.  The average total volume for Alcan options during April was 3350 contracts per day, while 8659 traded on Friday.
"

---

View Henry Schwartz's post archive >