Thursday’s total option volume of 17.4 million contracts resulted in net open interest growth of 2.46 million calls and 2.67 million puts. Constellation Brands (STZ), CenturyLink Inc (CTL), Bank of America Corporation (BAC) and Research In Motion Ltd (BBRY) saw the greatest growth. Top five new positions opened include 36k Live Nation Entertainment Inc (LYV) Mar-13 10 puts, 26k Cisco Systems Inc (CSCO) Mar-13 20 puts, 25k Hewlett Packard Co (HPQ) Mar-13 18 calls, 23k ON Semiconductor (ONNN) Mar-13 9 calls and 21k Constellation Brands (STZ) Mar-13 35 puts.
Today is options expiration. It is often the case that during the week of options expiration, the market continues to follow the intermediate term trend which is bullish. The week after options expiration, you often see follow through on the first trading day with a short-term trend reversal following later in the week. If you are looking to buy into this strong market, history suggests we may get an opportunity next week.
In global engineering firm KBR, Inc (KBR), there was an opening buyer of nearly 9,000 March 25 puts yesterday. The company reports earnings on Feb 20 and the stock is trading at about $31.60.
In American Electric Power Company (AEP), there was bullish flow yesterday with call buying in the Feb 45 and March 46 calls. This morning, the company reported earnings of $0.50 versus expectations of $0.45 and issued in-line guidance. The stock is trading up slightly. The dividend yield is 4.16%. With the options flow bullish, earnings uncertainty removed and a 4%+ dividend yield, this may be the type of stock where selling puts to collect premium makes sense. If you are put the stock, you will own a utility beating earnings and paying a high dividend.