Qualcomm, Human Genome See Busy Options

Your daily options trading wrap up.

Sentiment

Stocks moved broadly higher with help from falling crude oil prices and positive broker commentary Tuesday. With no economic data on the calendar, focus remains on oil prices. West Texas Crude for April, which jumped towards $107 yesterday, fell back to $103.33 this morning and was recently down 38 cents to $105.06 on talk OPEC might raise output. Meanwhile, Bank of America (NYSE: BAC) is up 4.6% and the best gainer in the Dow Jones Industrial Average after an analyst said the bank will soon announce a dividend increase. McDonald�s (NYSE: MCD) is off 1.1%, however, and one of three Dow stocks under water after the fast food chain released its February same store sales numbers. Still, the Industrial Average is up 150 points and the tech-heavy NASDAQ gained 24. With about an hour left to trade, the CBOE Volatility Index (CBOE: VIX) is down 1.16 to 19.50. Trading in the options market is on the light side, with 8.4 million calls and 5.9 million puts traded so far.

Bullish Flow

Qualcomm (NASDAQ: QCOM) shares had gapped down to $55.80 low but have recovered to $56.40 this morning. This morning the company announced a dividend boost of 13% to 21 cents per share. Option volume is running two times the daily average with notable transaction occurring in the QCOM April 48 Puts and QCOM April 60 Calls as both traded a 9,700 contract block in what looks like opening bearish risk reversal for a 30 cent net credit. This was possibly tied to stock.

Wells Fargo (NYSE: WFC) adds 73 cents to $32.45 Tuesday morning and the top options trade in the bank so far today is a block of 4,917 WFC April 34 Calls at 50 cents on the International Stock Exchange, which is an opening customer buyer, according to ISEE data. 28,650 now traded versus 25,318 in open interest. It appears that call buyers are dominating the action and looking for WFC shares to recapture $34 through the April expiration. Delta is .32 and the contract has 38 days of life remaining. Implied volatility is around 30%.

Bearish Flow

Coinstar (NASDAQ: CSTR) loses $2.24 to $42.30 and some investors are showing interest in CSTR puts today after Warner Bros announced plans to rent and sell videos over Facebook. Shares are under pressure and CSTR March 40 Puts are seeing some interest. 2,335 traded (94% on the Ask). Some of the action might be closing trades. Open interest in the CSTR March 40 Puts is 5,347 and the second biggest position in CSTR (behind CSTR March 45 Puts). It has a delta of -.25 and expires at the end of next week. The market is Bid 60 cents and Ask 70 cents. Meanwhile, implied volatility in CSTR is up 6.5% to 61. Coinstar�s original focus was on machines used to convert coins to currency, but it has also become a player in the movie rental industry through Redbox DVD rental machines.

Implied Volatility Mover

Human Genome Sciences (NASDAQ: HGSI) options are actively traded and implied volatility is moving higher again today ahead of the FDA’s decision on the company’s BENLYSTA lupus drug, expected around March 10. Today’s volume of 24,000 calls/30,000 puts is four times the recent average daily volume. Volume in the HGSI March 20 Puts is approaching 10,000 contracts (88% on the Ask). HGSI March 15 Puts are the second most actives, with 6360 traded (83% on the Ask). Some investors might be buying deep out-of-the-money short-term puts to hedge positions in shares ahead of the news. Implied volatility is up another 6% to 91 and now up about 15% on the week.

Option Flow

Bearish activity detected in Assurant (NYSE: AIZ), with 2570 puts trading, or 143 times its recent average daily put volume.

Bullish flow detected in Cheniere Energy (AMEX: LNG), with 20,517 calls trading, or four times its recent average daily call volume.

Bearish activity detected in Aeropostale (NYSE: ARO), with 2721 puts trading, or two times its recent average daily put volume.

Increasing volume is also being seen in Sprint Nextel (NYSE: S), Lorillard (NYSE: LO), and TIVO (NASDAQ:TIVO).

Frederic Ruffy is the Senior Options Strategist at Whatstrading.com, a site dedicated to helping traders make sense of the complex and fragmented nature of listed options trading.