Options Flow Summary: General Sentiment & Cisco Systems Inc (CSCO)
General Sentiment
The markets started the day nearly 1% lower on GMís charge and renewed pessimism in financials. However, dollar weakness and afternoon remarks from St. Louis Fed President William Poole spooked traders even further, pushing Dow Industrials to a low near 13,385, down more than 250 points.
Coincident with this move, the CBOE VIX has spiked above 25 on growing concern about a widening financial shakeout. Option volume is on pace for close to 14 million contracts, with equal numbers of calls and puts trading.
Cisco Systems Inc (CSCO)
Weíve seen massive option volume over the past several days in Cisco as traders position for this afternoonís earnings report. Todayís volume continues the trend, with more than 300,000 calls and just 87,000 puts trading by late afternoon with a generally bullish directional bias.
By far the most active strike is the November 35 call, with close to 110,000 trading with buyers dominating the flow. This included a large block of 10,000 for $0.70 on the ISE. Yesterdayís activity was also focused in this strike, as 72,683 contracts traded and open interest growing more than 33,500 contracts to current level of 92,298.
While the stock has sold off today with the general market to a current level of $33.20, this week of aggressive upside call buying suggests some traders are willing to invest significant short-term premium to participate in any positive earnings move.
Posted By: Trade Alert
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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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