A deeper look at today’s markets
Today’s Bullish Activity
On the upside this morning is Second Sight Medical Products Inc. (EYES) after announcing the first successful implant of a mechanical model of the Orion I Visual Cortical Prosthesis in an animal study. The company is expected to have fully functional prototypes later this year with active animal implants scheduled to begin in the first quarter of 2016. Shares of EYES last traded up $2.18 (or 17.27%) to $14.80 on heavy volume of 3.5M shares in the first 45 minutes of trading (average daily volume is 1.4M). Calls were outnumbering puts 3:1 with the May 12.50 call being the most actively traded contract (volume is 132 versus open interest of 47).
Also moving higher this morning is Tesla Motors Inc. (TSLA) after the company said that it is upgrading the old base model S (called the ?60?) to a new all-wheel-drive model (called the ?70-D?) which can go 240 miles per charge, has 514 horsepower and can go zero to 60 in 5.2 seconds. The older model had rear-wheel drive, could go 208 miles per charge, had 380 horsepower and went from zero to 60 in 5.9 seconds.? Shares of TSLA were last seen up $3.97 (or 1.95%) to $207.22 after trading as high as $210.90 earlier in the morning. Calls were outnumbering puts 4:3 with the April 10th210.00 call being the most actively traded contract (volume is 6,086 versus open interest of 3,472).?
Today’s Bearish Activity
Shares of Lions Gate Entertainment Corp. (LGF) are under pressure this morning after the company?s largest shareholder, MHR Fund Management, said that it is selling 10 million shares in an underwritten secondary offering which was priced at $32.00 per share. Shares of LGF last traded down $2.18 (or 6.47%) to $31.50 which puts the stock below both its 50-day SMA ($32.11) and 200-day SMA ($31.86). ?Puts were outnumbering calls nearly 2:1 with the April 17th 33.00 put being the most actively traded contract (volume is 4,079 versus open interest of 4,317).
Also on the downside is Flamel Technologies SA (FLML) which was down $2.19 (or 11.60%) to $16.69 on relatively heavy volume of 872K shares. Last night the company announced that Steve Lisi, the company?s Senior Vice President of Business and Corporate Development, has resigned for personal reasons. Concurrent with this announcement Flamel reaffirmed 2015 product revenue guidance of $170-185M. Puts were outnumbering calls nearly 3:1 with the May 15.00 put being the most actively traded contract (volume is 45 versus open interest of 62).?
Volume Signals
Leading today?s list of unusual options volume is Energy Transfer Partners L.P. (ETP) as total options volume is 20 times the average daily volume of 501 by mid-morning. Call volume was dominating (the top seven most active contracts are all calls) with the April 57.50 call getting the most attention from options traders. Volume on this contract is 8,308 versus open interest of 1,114, indicating that this primarily represents new positioning. Shares of ETP last traded up $0.45 to $56.84 after running up to its 50-day SMA of $57.90 earlier in the morning (the day high for the stock is $57.88).
Next on the list is American International Group Inc. (AIG) where total options volume is currently 91,673 vs. average daily volume of 5,004. The bulk of this volume spike is coming from two large far-dated blocks that appear to be part of a spread strategy. A 42,985 block traded for $1.80 on the January 2016 60.00 call and another block of the same size traded for $3.80 on the January 2017 60.00 call. Assuming this is a long calendar spread strategy (the trades took place in the middle of the spread), the block trader would be selling the January 2016 call while simultaneously buying the January 2017 call for a net cost of $2.00 per contract, or roughly $8,597,000 (42,985 x $2.00 x? 100 multiplier). Shares of AIG are trading higher by $0.41 to $55.39 which is near the upper end of its $48.56-$56.79 52-week trading range.
Lastly, Sina Corporation (SINA) is coming up on the radar as total options volume is 27,695 vs. average daily volume of 4,086. The top two most active contracts are the May 15th 40.00 call (volume is 2,848 vs. open interest of 5633) and the April 17th 37.50 call (volume is 2,031 vs. open interest of 7,798). SINA is posting its biggest one-day gain in nearly a year (last traded +3.64 to $36.73) which appears to be prompted by the 3.8% overnight jump in the Hang Seng Index. ?
Gauging Volatility
The VIX has been trading lower all morning as equity markets remain in the green ahead of March?s FOMC Minutes which are scheduled to be released later this afternoon. By mid-morning the VIX was at the lows of the day (-0.66 to 14.12) while the SPX was higher by 6.77 to 2083.10. VIX options volume has been light (currently missing from the top 10 most active list) with the May 21.00 call getting the most attention from traders (volume is 25,592 vs. open interest of 24,090).
Shares of Alcoa Inc. (AA) are trading slightly higher (+$0.16 to $13.59) ahead of the company?s Q1 earnings release after market close today. Analysts are expecting the company to report earnings of $0.25 per share on revenue of $6.0B (vs. the $0.09 and $5.5B the company posted during the same period last year). Back in January AA reported Q4 earnings of $0.33 per share ($0.05 above the $0.28 estimate) on revenue of $6.4B (vs. the $6.05B estimate) and the stock closed down by $0.37 (or 2.2%) to $15.80 the following day (after initially opening higher by 2%). Calls are currently outnumbering puts nearly 5:2 with the May 15th 15.00 call being the most actively traded contract (volume is 2,939 versus open interest of 12,492). Average implied volatility is running higher this quarter at 61% versus the 52% level seen going into last quarter?s report. Note: the average implied volatility represents the around the money puts and calls for the two nearest available expirations on the underlying.