Today’s tickers: MGM, LVL, XHB, RYL, RIGL & LM

MGM – MGM Mirage – Investors showed their true colors following a 67% decline in profits at Vegas casino and leisure company. The rebound today of more than a quarter of its share price to $13.27 tells us that it was short sellers earlier who tried to take it down. The company was less than optimistic in announcing losses and noted it was shelving expansionary plans until the capital markets were more solid and there were signs of life at the casinos. Calls were in demand in the November contract between strike prices of 12 through 20 while a decent chunk of 10 strike puts was bought for a premium of 1.40 after the shares had recovered. There was also healthy two way activity in the December puts at both 10 and 12.5 strikes. That tells us that the rebound was largely short covering and shares might not yet be out of the mess.

LVS – Las Vegas Sands Corp. – Hand-in-hand with MGM goes Las Vegas Sands, whose shares recovered by a huge 80% to stand at $8.91 today. The move sparked call option buying in the November contract from strikes as low as 5.0 all the way through 17.5. More curiously was activity in the put options where investors chose to go long November 7.5 at a premium of 1.50, while selling short the December 10 strike. Our scanners indicate that some 16% of overall open interest is in play today. Implied volatility subsided from a reading of 293% to 231%.

XHB – SPDRS S&P Homebuilder ETF – Around one quarter of overall option open interest was trading this morni…

Today’s tickers: FITB, HRB, GM, SAP, C, FTR, FHN & INTC

FITB – Fifth Third Bank – Now that Fifth Third has requested a $3.4 billion loan from the government as part of their $250 billion giveaway, investors – or possibly short sellers – have plowed back into the stock today sending shares 16.2% higher at $9.39. Option-related activity paints a more interesting picture. At the November 10 strike, it appears that sellers of puts might be taking profits since this series is the most populated in the ticker. At the 7.5 and 5.0 strikes, investors are getting long of puts on today’s relief. The December contract is again busy on put activity at both 5.0 and 10 strike, but most have traded to the middle of the market. In the January contract it appears that one investor is more optimistic that the worst of the news will be over in the New Year. The action suggests a credit put spread at the 5.0/7.5 strikes with the higher strike sold at a premium of 2.0 against the insurance of the 5.0 strike at 1.30. The resultant 70 cent credit goes to the investor in the event the shares are higher than 7.5 at expiration with a maximum loss of 1.80 at or below the 5.0 strike in the event the situation becomes graver.

HRB – H&R Block – Three weeks ago when shares in tax accountant H&R Block were trading as high as $19.60, an investor bought some 10,000 November 20 strike puts at a premium of 1.75. Today shares are trading at $15.70 making these puts even deeper in-the-money and our market scanning tools have picked up what looks like a calendar roll out of this position and into the January 17.5 strike. The investor looks to be taking profit on the init…

Today’s tickers: FITB, HRB, GM, SAP, C, FTR, FHN & INTC

FITB – Fifth Third Bank – Now that Fifth Third has requested a $3.4 billion loan from the government as part of their $250 billion giveaway, investors – or possibly short sellers – have plowed back into the stock today sending shares 16.2% higher at $9.39. Option-related activity paints a more interesting picture. At the November 10 strike, it appears that sellers of puts might be taking profits since this series is the most populated in the ticker. At the 7.5 and 5.0 strikes, investors are getting long of puts on today’s relief. The December contract is again busy on put activity at both 5.0 and 10 strike, but most have traded to the middle of the market. In the January contract it appears that one investor is more optimistic that the worst of the news will be over in the New Year. The action suggests a credit put spread at the 5.0/7.5 strikes with the higher strike sold at a premium of 2.0 against the insurance of the 5.0 strike at 1.30. The resultant 70 cent credit goes to the investor in the event the shares are higher than 7.5 at expiration with a maximum loss of 1.80 at or below the 5.0 strike in the event the situation becomes graver.

HRB – H&R Block – Three weeks ago when shares in tax accountant H&R Block were trading as high as $19.60, an investor bought some 10,000 November 20 strike puts at a premium of 1.75. Today shares are trading at $15.70 making these puts even deeper in-the-money and our market scanning tools have picked up what looks like a calendar roll out of this position and into the January 17.5 strike. The investor looks to be taking profit on the init…

Today’s tickers: MSFT, HBC, DWA, AGN, XLF, C, MS & VIX

MSFT – Microsoft Corp. – Despite an initially positive response to Microsoft’s earnings yesterday, its shares couldn’t avoid the initial Friday meltdown. By noon they had rallied 1.1% to stand at $22.59. Given the robust options volume sniffed out by our scanners today we were curious to look at precisely where the volume took place. In the November contract at the 19 strike puts investors sold several blocks of 2,000 lots between 82-84 cents as volume rose to around 19,000 contracts in the series. On looking further we note that open interest during the past five sessions has grown by roughly the same amount indicating that today’s put sale is likely the successful removal of intended downside protection over earnings. So today’s market meltdown provided a cherry on top of the cocktail for at least some Microsoft option traders. Elsewhere the January 30 strike call appears to have been sold around 15,000 times indicating a lack of conviction that the shares will recover too strongly in this environment.

HBC – HSBC Holdings ADR – While Asia has been largely unscathed by the financial crisis to date, there is no escaping the fact that the fresh wave of currency dislocation is impacting economies and companies. Today shares in HSBC are sharply lower by 15.5% at $54.45 as evidence emerges suggesting corporations are being hammered with currency related losses. The Far East and emerging markets are core areas for HSBC and Standard Chartered Bank. Our market scanners picked up a sharp rise in implied volatility in HSBC options by 15% to 86% as put demand was evident at the 60, 50 and …

Today’s tickers: MGM, CMCSK, URBN, LUK, GYMB, & AMZN

MGM - MGM Mirage - Billionaire Kirk Kerkorian isn’t having much fun these days. Earlier this week he was forced to choose between his investment in the ailing auto industry through Ford and gaming interests in MGM Mirage. He said he sees more opportunity in gaming and leisure than in cars and as such is ditching his holdings in Ford to free up capital, which may well end up unwinding collateral used in MGM Mirage. Yesterday Fitch cut its ratings on some MGM obligations. Today, its shares are down 16% to $10.38 and option traders are piling on the pain. Our scanners indicate buyers of puts at the November 7.5 and 10 strikes at premiums of 90 cents and 1.84. In addition heavy call volume at the 12.5 strike exceeds currently open positions and appear to be largely instigated by sellers in clear expectation that the 1.20 premium received is sufficient to buffer against a snapback for the share price beyond $13.70. And with jet fuel demand running flat at the Las Vegas airport, party-goers are clearly tightening their belts.

CMCSK – Comcast – A 1% rise in shares to $13.98 at cable operator Comcast coincide with yesterday’s news about their roll out of even faster Internet connections to customers. For even faster connection business or personal customers can now pay for the privilege. Investors are responding positively to the news while one sizeable option play indicates that while the news might stop shares in Comcast from falling, they have initiated a play today that suggests that some uncertainty might dissipate from current events. With options implied volatility running at around 98% it appears that a …

Today’s tickers: WFC, PG, CVH, ISIL, ILMN & RMBS

WFC – Wells Fargo – Shares are a little lower at $31.94 following results from Wachovia, which Wells is in the process of buying. The curious option activity was at the January 20 strike puts where investors added to existing open interest of 74,050 lots as they bought around 25,000 contracts for a premium of 1.0. This would seem to indicate that these investors are firmly expecting weakness at Wells Fargo looking forward. Today management noted that although the current environment is bad, it’s not as bad as the ‘80’s and that its customers are faring okay, other than its customers in residential mortgage and autos.

PG – Procter & Gamble – With a week to go before the consumer-products giant reports earnings we picked up some over-sized options activity today, which we’re struggling to make sense of. With shares trading 3% lower today at $61.04 two chunks of around 35,000 calls and puts were traded in the November contract. From time and sales we can see that at least 30,000 calls were sold for a nickel. Meanwhile the 35,000 puts were traded to mid-market prices obfuscating the investor’s intention here. A sale would have the investor short the 80 strike strangle at a gross premium of around 19.55. If that’s the case the hope is that shares will remain above $60.45 by expiration and will actually rally back to the 80.0 strike price where the investor would keep the premium. However, the puts might have been purchased with the investor simply buying stock and taking advantage of the nickel premium on the calls.

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Today’s tickers: XOM, TXN, KEY, AXP, CSCO, GRA, C & CRK

XOM – Exxon Mobil – With oil shares underperforming the declining price of crude oil in the face of an outright economic slump, we watched intriguing investor psychology in action today. Shares of XOM reached an intraday low at $69.21 while an option trader took the opportunity to unleash a short straddle in the January 80 series. Typically an investor sells volatility when selling a straddle and retains the gross premium, which in this case sums to 15.60. The investor is likely looking at the daily gyrations of the share price over the last three months and has concluded that peak volatility has already been seen for Exxon. Less than two weeks ago its shares reached $56.51 and in early August stood at $85.00. So a current reading for imply volatility of 59% is apparently enough to see the trader weather the storm through the next three months. If Exxon shares settle at the $80.00 strike by expiration, the trader keeps the premium, but still makes money so long as its shares remain within the range boundaries created by the premium of $54.40 to $96.60.

TXN – Texas Instruments – Analysts pulled in their horns following a disappointing profit reading from TI accompanied by a lack of optimism for the foreseeable future. Shares slipped 8% to $16.50 although the consensus seemed to be that the problems facing TI are the same as those faced by the broad economy. So while current prospects are not good, management remains competent. In early trading options activity was twice as brisk as normal and there was a notable flurry of interest at the January 20 strike where 20,646 contracts were bought at a 51 cent …