Unusual Options Activity Review: HUN, ANF, KEY, THC, HIG, QCOM, GFI, CAG, .SPX, .VIX, UNG

Posted June 15th, 2012 by Joseph Cusick in Unusual Activity

Unusual Options Activity Review For Thursday, June 14, 2012

Thursday's Bullish Trading
Huntsman (HUN), the Salt Lake City, UT chemicals company, saw an impressive spike late-Thursday after Reuters reported that Bank of America was hired to shop the company. HUN jumped in afternoon action and finished the day up $1.09 to $12.96 on heavy volume of more than 22 million shares. Meanwhile, options volume hit 12X the daily average with 19,000 calls and only 1,100 puts traded on the stock Thursday. June 12 calls, which are 96 cents in-the-money and expiring after Friday, were the most actives. 5,480 traded. June 13, July 13, and July 14 were also busy and implied volatility increased by 12 percent to 59. Speculators were apparently driving the action and the sentiment reflects the bullish move seen in the underlying stock price Thursday.

Bullish trading was also seen in Abercrombie (ANF), Key Banc (KEY), and Tenet Healthcare (THC).

Thursday's Bearish Trading
Rolling activity drives a lot of the action in the options market when expirations start approaching. A roll happens when investor closes out a position in a contract that is nearing expiration and then opens a new position in a more distant expiration month. An example surfaced in Hartford (HIG) Thursday. Shares of the insurance company added 12 cents to $16.88, but are down about 23 percent since early-April. One player in the options market apparently adjusted a defensive position on the stock and bought 17,000 June 18 calls on HIG for a nickel, sold 17,000 September 17 calls at $1.46 and bought 17,000 September 13 puts for 45 cents. It is probable that the spread trader was short the June 18 calls and bought them back (to close) Thursday before they expire after Friday, while opening a new position in the September 13 ñ 17 bearish "risk-reversal". They sold the September calls, bought puts to open. A large HIG shareholder might have initiated the spread. If so, they were in a covered call position (long stock and short June calls), but then rolled to a collar (long stock, long September puts, short calls) strategy on HIG.

Bearish trading was also seen in Qualcomm (QCOM), Gold Fields (GFI), and Conagra (CAG).

Index Recap
Overall options volumes finally picking up heading into the Quadruple Witch expiration. After three days of very slow trading, 752,000 calls and 825,000 puts traded on the S&P 500 Index (.SPX), CBOE Volatility Index (.VIX) and other cash index products Thursday, according to Trade Alert. The S&P 500 rallied 14.22 points to 1,329.10 and June 1,300 puts and calls on the SPX were the most active index contracts. Since settlement values for the S&P will be computed Friday morning, the last day to trade June options on the index was Thursday and players were likely closing out positions to avoid the risk of assignment/exercise on the options. In contrast to equity options, which settle for shares, index options settle for cash equal to the difference between the strike price of an in-the-money option minus the settlement value of the index (X100).

Analyzing the ETF Market
US Natural Gas Fund (UNG) saw heavy volume on a good day for the commodity Thursday. Natural gas prices rallied 33 cents, or 15 percent, to $2.52 on the heels of bullish weekly inventory data. UNG, which is an exchange-traded fund that tracks natural gas prices with futures contracts, rallied $2.28 to $17.53 on heavy volume of 27.5 million shares, which is almost triple the daily average. Meanwhile, 67,000 calls and 90,000 puts traded on the fund, which is 4.5X the daily average. June and July 16 puts were among the most actives. Some investors might have been liquidating positions in those short-term puts, as shares were moving 9.6 percent away from the $16 strike price.

-----------------------------------------------------------------------

Disclaimers
This article is provided for informational purposes only. No statementin this article should be construed as a recommendation to buy or sell asecurity or to provide investment advice. The content provided has beenobtained from sources deemed reliable but is not guaranteed as toaccuracy and completeness. optionsXpress makes every effort to providetimely information to its recipients but cannot guarantee specificdelivery times due to factors beyond our control.

Derivatives involve substantial risk and are not appropriate for all investors. Please read the "Disclosure Statement for Futures and Options" prior to investing in futures or options.

For investments using a straddle or strangle options strategy thepotential loss is unlimited. Multi-leg option strategies are subject tomultiple commissions. Profits may be eroded by the commission expendedto open and close the positions and other risks apply.

"

About Joseph Cusick

Joseph Cusick currently serves as the Senior Vice President of Education and a Senior Market Analyst for optionsXpress. Mr. Cusick seeks out common sense and technologically scalable educational pathways for self-directed investors of all experience levels. He is largely responsible for ramping up delivery of online and offline seminars to customers and potential clients worldwide. Prior to serving in his current role, Mr. Cusick immersed himself in the broker side of optionsXpress by managing his own book of business. Prior to joining optionsXpress, Mr. Cusick served as a market maker and portfolio manager at the Chicago Board of Options Exchange. Joseph is a graduate of Marquette University and holds his Series 4, 7 and 63 registrations with FINRA.

View Joseph Cusick's post archive >