GOOG – Investors were spooked by this morning’s tempestuous share price action in Google. With whipsaw action characterizing much of the day’s trading, Google shares opened around $640 before taking a $38 dive around 11 a.m. and retracing quickly, closing 3.2% lower at $617.25. This was still triple the decline on the Nasdaq Composite. The move was enough to send implied volatility 17.7% higher to 47.7%, which is 1.6 times the historic reading and the highest level on our books. Moving volume as of this dispatch is equivalent to nearly 1 of every 4 contracts in play. What’s more, most of this appears tied up in fresh volatility plays in the January contract, which is due to expire Friday, with buyers and sellers generating fresh volume in puts at strikes as low as 580 and up to 630, combining these with calls between strikes of 610 and 640 as traders brace for more manic share price action in the final days of the January contract.
TIBX – Options in Tibco Software traded at nearly 12 times the normal volume today as its shares closed 11% higher at $7.51. Tibco was the topic of takeover speculation in late-November, which was never resolved, and which may be a good part of the explanation behind the extremely elevated 60% implied volatility reading. Dashed expectations of a takeover bid may also explain the fact that Tibco’s densest option position by open interest is the January 10 call, which has twice as many open positions as the at-the-money January 7.50, and appears likely to expire worthless on Friday. Still, our attentions were seized by a a wave of fresh call buying in 7.50 calls at the August contract, which at $1.00 piece imply a move to $8.50 by late summer.
AMD – It stands to reason these days that bad news out of Intel is good news – or at least, a relief of its misery – for AMD. Indeed, as its chip rival-cum-overlord trades 12% lower this afternoon after yesterday’s earnings report missed the mark, AMD found itself trading 6.7% higher at $6.53 on the eve of its own earnings report. The price of the front-month, $6 straddle shows option traders anticipating a 14% price move on back of earnings. But with 2.6 calls moving for every put, and brisk buying interest in January calls at 6 and 7.50, many option traders may be betting that AMD has been through the worst of things and lived to tell the tale. We also observed very active call volume in the April contract, at strikes of 6, 7 and 8.
HLTH - Options in HLTH Corp., the company behind WebMD, are trading at more than 13 times the average level this afternoon, as its shares closed 2.7% lower at $11.93. For those keeping track, this is a new 52-week low. With put premiums gaining value on the share price decline, it appears that a trader closed out a position in the January 12 puts for $3.00. If the trader bought these contracts back in early September, when most of the open interest in this strike built up, he or she would have seen the investment more than double in value in the interim. It appears that the profits may have been reinvested in the April 12.50 straddle, which at $1.75 today would generate profit with a break above $14.25 or below $10.75.
JPM –Earlier this morning, the country’s third-largest bank, JPMorgan Chase, reported a 34% decline in fourth-quarter profits due to subprime mortgage exposure, higher loan loss provisions, and fewer revenues from its trading activities.
