Mid-day Flow Summary: General Sentiment, FMCN & EMC
General Sentiment
Broad averages are slightly lower this morning and there has been little movement in the CBOE VIX. It currently stands at a relatively calm 19.28. Options activity is neutral, with 2.6 million puts and 2.9 million calls on the tape at midday. Media sector options are unusually active today, where calls lead puts almost 2 to 1 and the flow is decidedly bullish.
Focus Media (FMCN)
The stock is up more than 16% to $56.53 on an analyst upgrade. Also, there was news that an internal investigation was completed without negative findings. By 1pm, more than 57,000 contracts have changed hands. This is more than 5 times the average daily volume levels. Call buyers lead the flow with aggressive multi-market orders to buy the October 55 and 57.5 calls. Close to 6,000 of each have traded on the day and implied volatilities have dropped as the uncertainty related to the investigation wanes.
Examination of options flow from yesterday shows few early clues. In fact, sellers dominated the October 57.5 calls at $.85 for much of the yesterday. Those calls are trading above $4.00 this morning.
EMC Corp (EMC)
Bullish flow from yesterday is continuing in EMC today. The stock is up nearly 2% to $20.90 and the focus is on the October 20 calls. Nearly 25,000 of these calls traded yesterday in what looks like covering of short-call positions.
Another 13,000 calls have traded today with the majority being buyer-initiated. Also, a diagonal call spread traded on the CBOE more than 5000 times as a buyer bought Jan-08 20 calls and sold April-08 22.5 calls for a net debit of $0.65. This might also turn out to be closing at the 20 strike.
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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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