Intra-Day Significant Options Activity
ETF / Indices Mentioned: IWM, VIX, XHB
Stocks Mentioned: AMD, BAC, C, CYH, EMC, MRO, PNK, THC, TLAB, TSO, VRTX
ETF / Indices
A number of broad based products saw an influx of volatility buyers this morning including the SPX, IWM, RUT and VIX. In some of the more notable trades we saw participants in the CBOE Volatility Index (VIX, 13.42, +1.13%) buy approximately 10,000 April 14 (.60d) calls, and in the iShares Russell 2000 Index (IWM, 78.89, +0.05%) investors bought volatility through approximately 45,000 May 80 puts versus stock, delta neutral.
In the S&P Homebuilders SPDR (XHB, 34.18, +0.68%) investors sold 10,000 June 30 puts to buy 5,000 June 33 puts in seemingly bearish trading. Recently we have seen mainly buyers of puts in this ETF and in the PHLX Housing Index (HGX).
In Vertex Pharmaceuticals (VRTX, 28.15, +1.07%) opening investors bought ~11,000 April 35 (.18d) calls throughout the morning. The out-of-the-money call buyers could either be speculating on a notable upside move in the coming weeks, or using the options to hedge short stock positions. The European Association for the Study of the Liver (EASL) conference is being held in Barcelona, Spain, April 11 - April 15, 2007. VRTX's most advanced product candidate, Telaprevir, is currently in Phase II trials for the treatment of HCV infection.
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In both Citigroup Inc (C, 50.79, +0.30%) and Bank of America (BAC, 50.61, -0.30%) we are seeing buyers of downside puts in April. Specifically, in BAC investors bought 10,000 April 50 (.35d) puts paying $0.65 while in C investors bought 10,000 April 50 (.35d) puts paying $0.70. Both of these put purchases appear to be more protective in nature. Recall that we have recently seen consistent buying of puts in the Financial Select Sector SPDR (XLF); BAC and C are the two largest components of this ETF.
Activity in Pinnacle Entertainment Inc. (PNK, 30.12, +3.58%) options picked up this morning amidst takeover headlines with investors aggressively buying April 30 and 35 strike calls a total of 1,000 times as the stock climbed roughly 7.5%. PNK was the subject of unconfirmed takeover chatter this morning after rumors circulated that the company had cancelled a meeting at an investor conference. A company spokesman later confirmed the cancellation, calling it a "scheduling conflict."
For the second consecutive day in Community Health Systems Inc (CYH, 34.07, +0.59%) investors are sellers of the May 35 straddles. They have now sold 8,000 of the straddles since yesterday (5,500 times today). Recall, that two days ago in CYH we noted delta neutral buyers of the September 50 calls.
Currently, CYH is estimated to report earnings on 4/25/07 which falls into the May expiration cycle. CYH announced this week that they have entered into a definitive merger agreement where CYH will acquire TRI for $54 per share in cash or approximately $6.8 bln including $1.7 bln of existing indebtedness. Subject to regulatory and TRI shareholder approval, the deal would be expected to close in 3Q07.
Opening investors in Tenet Healthcare Corp (THC, 6.52, +0.15%) bought 20,000 January 7.5 calls versus stock on a delta neutral basis. The volatility buyers are anticipating increased movement in the stock. In comparison to today’s volume, calls in THC typically trade under 1,500 contracts a session.
In EMC Corp. (EMC, 13.05, +0.23%) investors continue to indicate a bearish sentiment through buying in-the-money puts. Over the past two trading sessions investors have purchased roughly 25,000 April 14 (.85d) puts (5k today). On Wednesday of last week (3/14/07) investors bought 15,000 April 15 (.20d) puts, and separately bought 20,000 July 13 (.55d) calls. EMC is expected to report Q1 earnings on 4/17/07.
In Marathon Oil (MRO, 97.71, -0.30%) opening investors sold 5,000 May 100 (.55d) puts at $5.05, equivalent to getting long approximately 275,000 shares of stock. While selling volatility through these puts, the investors also likely have an upside directional bias over the next couple months approaching May expiration.
In Tesoro Corp. (TSO, 98.43, -0.30%) opening investors bought 2,500 May 100 (.48d) puts paying $5.80. While getting long volatility, these investors could either be aggressively protecting long stock positions or speculating on a downside move heading into May expiration (5/19/07). TSO is estimated to report earnings on 5/4/07.
Activity in Advanced Micro Devices Inc. (AMD, 13.69, +2.09%) generally consisted of call buyers this morning as the stock trended up nearly 3.50%. In one of the more notable trades, with the stock trading at approximately $13.75, opening investors bought 7,500 May 14 (.51d) calls paying $0.83. AMD is estimated to report 1Q earnings on 4/12/07.
Amidst unconfirmed takeover chatter in Tellabs Inc (TLAB, 10.22, +2.00%) we noted activity in the April options. Specifically investors bought 1,500 April 10 (.65d) calls.
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