Options Movers: DRYS, MGM, MON, PAYX
Bullish Options Flow
DryShips (DRYS) adds 33 cents to $4.46 and 23K calls traded on the ticker through midday Monday, after Morgan Stanley upgraded shares to Equal Weight from Under Weight. October 5 calls are the most actives. 6,900 traded (88% at the ask). Looks like buyers are dominating the action in the Oct 4, Nov 5, and Dec 5 calls as well. Implied volatility is up 13% to 51.5 (compared to a 52-week high and low of 88 and 42.)
MGM added 36 cents to $11.04 on news it has filed to list shares on the Hong Kong Exchange. Early options trades include a Mar 12 – 14 call spread, 2500X, that's frankly a little stupid $1.93 to buy both the 12s and 14s. About 15K calls and 1685 puts traded in MGM so far.
Bearish Options Flow
Monsanto (MON) showed relative weakness and increasing put volume Monday. Shares are down $1.91 to $53.47 and near session lows. It's been a steady descent during today's trading. Meanwhile, the top two options trades were blocks of 3,987 and 3,192 Oct 55 puts at $2.53 and $2.20 Monday morning on ISE. Both are opening customer buyers, according to ISEE data. Good timing because the contract is now bid at $2.91. 12.25K Oct 55 puts now traded. Oct 42.5 and 52.5 puts are seeing interest as well. Implied volatility is up about 9% to 37, but with no obvious headlines to explain today's bearish action in MON Monday.
Implied Volatility Mover
Pre-earnings action in Paychex (PAYX). Shares are off 29 cents to $26.94 and recent trades include a multi-exchange sweep of 3664 Dec 24 puts at 40 cents each. Looks like an opening buyer. Oct 27 puts and calls are seeing interest as well. 3,300 calls and 6,000 puts traded, or 6X the average daily volume in the name. Implied volatility is up 9% to 25 ahead of the results, due out after the closing bell.
Market action was very slow Monday. With no economic data to drive the morning trading, the focus was back on merger and acquisition activity. Unilever (UL) made a bid for Albert Culver (ACV), and Wal-mart (WMT) struck a deal to buy South Africa’s Massmart. The airline sector is seeing relative strength after Southwest (LUV) made an offer for Airtran (AAI).
Beyond that, it’s been a slow news day with lackluster market action. Options volume is on the light side, with about 5.3 million calls and 4 million puts traded so far.
Senior Options Strategist, WhatsTrading.com
TradeKing All-Star Commentator
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While implied volatility represents the consensus of the marketplace as to the future level of stock price volatility or probability of reaching a specific price point, there’s no guarantee that this forecast will be correct.
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