What Options Are Saying about Techs, Financials

Andrew Fisher

If you think options are a good indicator of future stock movements, you may want to keep an eye on the big cap techs and financials, according to two experts.


"Implied volatility is showing us the possibility of a 5 percent up or down move in Intel ," said Rebecca Darst of Interactive Brokers, on CNBC Friday. "I know the stock has been pretty much caught in a range of 22, 23 dollars since late December, and I think that the fact that we saw calls moving at about a two-month high yesterday shows a lot of pent-up impatience among option traders to see this stock move. Obviously, it got some positive attention on the back of that analyst upgrade yesterday, and I think that elicited a lot of the volume we saw trading to buyers and sellers in the April 22.50 calls. There was a lot of buying interest yesterday in, also, the May 24 dollar calls. These traded at four times the open interest, so there's some early indications that Intel might have some upside coming, but that was a different universe yesterday."

"We did see some activity in the over-the-counter market on downside puts in Intel," added Dennis Davitt of Credit Suisse, also appearing on CNBC. Intel's a big bellwether stock. It's really tough to read the tea leaves on a stock like Intel."

JPMorgan ...

Options Report

"An interesting burst of activity we've seen in JPMorgan , and that's the selling of options," said Davitt. "All the other financials are showing 7 to 9 percent moves expected going into earnings. We look at JPMorgan, and it's much more subdued. JPMorgan, we're seeing people expecting maybe a 2 to 3 percent move."

eBay ...

"Interesting that eBay is not a favorite among hunters of implied volatility," said Darst. "It's not a terribly volatile stock right now. The options implied volatility is showing a 6 percent up or down move. This is actually less than it's shown over the past two earnings cycles, when it was up 6 1/2 percent.

"I'd say their guidance has been very, very cautious for this quarter; I know it got some positive analyst attention earlier this month, but this was, really, nothing has changed in that company other than who's at the helm, so I think from a volatility standpoint, option traders will be looking for any indication that they have plans to off-load Skype; I know Google has been mentioned as a possible buyer before, but they've got bigger fish to fry right now, so I think yesterday we noticed some sporadic purchases in April 32.50 calls, and then on the downside in 30 dollar puts, but these didn't appear to be volatility trades; they weren't done together."

Google ...

"Google, if you put us into a corner, we'd have to be with the buyer of the Google options," said Davitt. "I still think it's a good buy, relative to the...advertising revenues and so on, so we're not seeing a higher implied volatility, so the options market is kind of saying 'business as usual' going into earnings. We think it's not really business as usual at Google, and in current market conditions...we think they should buy options in Google ."

GE ...

Of course, options traders don't always get it right. Take GE . There wasn't any positioning for its miss ...

"The options market was really caught flat-footed on this one," said Davitt.