Economic data was in focus early Monday after a report showed Retail Sales increasing by 8 percent during the month of March. Economists were expecting a smaller increase of .3 percent. However, a separate report showed regional manufacturing in the Northeast improving less than expected in April. The NY Empire State Index fell to only 6.6 this month, down from 20.2 in March and well below expectations of 17.5. Business Inventories were up .6 percent in February and .1 percent more than expected. Finally, the NAHB Homebuilder Sentiment Index was down to 25 in April, from 28 the month before and much worse than the 29 that was expected. Trading was mixed through midday and Citi shares ticked higher on profit news to help the SPDR Financial Fund (XLF) to a modest gain. Trading remained mixed into afternoon action and, at the closing bell, the Dow Jones Industrial Average was holding a 71-point gain, but the tech-heavy NASDAQ lost 22.9.
Netflix (NFLX) lost $3.02 to $101.15 on relatively light volume of 3.8 million shares. Typical volume is about 4.8 million. Meanwhile, options action was interesting, as 52,000 calls and 24,000 puts traded on the stock. Much of the call activity was due to spread trading. In afternoon action, 9,000 May 115 calls traded on the stock for $4.05 and 9,000 May 130 calls at $1.45. The May 115 – 130 call spread, for a $2.60 net debit, appears to potentially be a new position. The same spread also traded another 5,000X for $2.70. The position, which was apparently bought to open a new position, is a bullish play that makes its best profits if NFLX rallies to $130, or 28.5 percent, through the May expiration (32 days). That's a rather large move. And the spread might be a play on earnings. Shares jumped 22 percent on 1/26 when Netflix last reported earnings. The company is due to report again on April 23.
A large trade surfaced in Micron Technology (MU) Monday. Shares of the chipmaker added 15 cents to $7.12 on the day, but are down 19.4 percent during the past month. One investor might be possibly looking to hedge a big stock position as 25,000 January 2014 $10 puts were bought on Micron today. The investor paid $4 per contract on the International Securities Exchange and was opening a new position. The premium purchase, totaling $10 million, is somewhat unusual because the puts are already $2.88 in-the-money. So, an investor is possibly using the puts to hedge a long stock position on concerns the recent decline in shares may continue in the weeks/months/years ahead.