Mid-day Flow Summary

Posted May 15th, 2007 by Henry Schwartz in Trading & Analysis

Applied Materials (AMAT)
One of the few earnings names left this week (earnings are expected post-close today), AMAT continues itís streak of options activity. The stock closed at $20.48 yesterday, up $1.30. Yesterday's flow was dominated by upside call buyers.

This morning the stock has softened a bit and is trading near $20.00. The May 20 calls continue to be the focus, with nearly 11,000 trading by noon at prices ranging from $.75 at the open to $.55 more recently.

While yesterdayís activity in this option was characterized by call-buyers, todayís flow is more two-sided. This suggests that the expectation for a positive reaction to earnings may already be priced into the stock (the stock is up from last weekís $19.35 range).

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Newfield Exploration Co (NFX)
This oil and gas stock is up 3.88% to $47.88 on news that it will buy assets from Stone Energy (along with analyst upgrades and takeover chatter). Not surprisingly, NFX options are unusually active today, with nearly 15,000 contracts trading versus the average daily volume of 1600.

Todayís activity is concentrated in calls and involves a term-structure play. Traders are selling longer-dated Jan 08 and Jan 09 options, but buying June and September in hopes of seeing continued near-term volatility that fades next year. NFX has lifted from the $43.50 range since May 1, with heavy options volume appearing on May 3, May 7, and today. Over the 10 trading days from May 1 through yesterday, more than 15,000 calls have changed hands with the majority trading on the offer side. Todayís activity adds to the bullish option bias.

PIN Candidates
Since yesterday, ORCL has moved closer to spot with growing open interest and CSX is no longer listed as the stock has lifted through the near strike and is trading up 1.26 to $46.15.

Symbol	Expiry	Strike	Put / Call	Spot	Distance	Open Int
ORCL	May7	19	Calls	19.08	0.08	43099
ORCL	May7	19	Puts	19.08	0.08	4490
HPQ	May7	45	Calls	45.11	0.11	30611
HPQ	May7	45	Puts	45.11	0.11	8463
ELN	May7	15	Calls	14.85	0.15	32565
ELN	May7	15	Puts	14.85	0.15	10756
MRVL	May7	17.5	Calls	17.28	0.22	60295
MRVL	May7	17.5	Puts	17.28	0.22	37747
SNDK	May7	45	Calls	44.74	0.26	29325
SNDK	May7	45	Puts	44.74	0.26	15971
CVS	May7	37.5	Calls	37.8	0.3	36030
CVS	May7	37.5	Puts	37.8	0.3	26727

About Henry Schwartz

Henry Schwartz has traded derivatives on US and European exchanges for nearly 20 years. His experience includes market-making and institutional trading at the Hull Group, Salomon Brothers, Bear Stearns and most recently Banc of America Securities, where he led the electronic market-making project coincident with the launch of the ISE. His current work involves real-time stream analysis of options market activity for a number of leading institutional sell-side firms.

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