Unusual Options Activity Review: FCX, SWY, COP, OC, .VIX, XLPKO, EL, LO

Posted June 18th, 2012 by Joseph Cusick in Unusual Activity

Unusual Options Activity Review For Friday, June 15, 2012

Friday's Bullish Trading
Credit Suisse (CS) gained 91 cents to close $18.88 on heavy trading of more than 4 million shares Friday. The stock is trying to recover some of the losses from the day before, when CS lost nearly 10 percent after the Swiss National Bank urged the company to raise more capital. The stock rebounded Friday, however, and options on the Swiss financial services giant are busy as well. July 19, July 20, and September 21 calls were the most actives, as some players might be anticipating a rebound in the stock ahead of Greek elections over the weekend and amid hopes that Central Banks will soon act (provide liquidity) to help stem some of the strains in the European financial system.

Bullish trading was also seen in Applied Materials (AMAT), Cablevision Systems (CVC), and GNC Holdings (GNC).

Friday's Bearish Trading
Freeport McMoran (FCX) had some unusual options activity Friday. Shares of the gold and copper miner were up 44 cents to close $34.34 in volume of almost 14.8 million shares. Options on the stock were busy. 58,000 calls and 57,000 puts traded, which is about double the normal pace. July 28 puts were the most actives and the flow includes a morning buyer of 15,000 contracts for 37 cents per contract, according to a source on the Chicago Board Options Exchange. Later, another 14,000 were bought for 37 cents. Total volume is now more than 31,000 against just 2,856 in open interest. FCX spent several months in a bearish funk before gaining almost 7 percent so far in June. July 28 puts are now 18.3 percent out-of-the-money and a large shareholder might be initiating the put buying to hedge the stock from the risk of another leg lower over the next 35 days. July options expire in five weeks.

Bearish trading was also seen in Safeway (SWY), Conoco Phillips(COP), and Owens Corning (OC).

Index Recap
CBOE Volatility Index (.VIX) was all over the map Friday, bouncing in and out of positive territory, before losing .57 to 21.11 on the day. Options on the index were actively traded. 293,000 calls and 366,000 puts traded in the VIX pit. 120,000 June 19 puts were sold on the index in morning trading. Open interest in VIX June 19 puts, which expire in four days, is more than 176,000 contracts and Friday's put seller might have liquidated a position on the view that VIX is not likely to fall on Monday and Tuesday after the weekend and ahead of the VIX expiration Wednesday. Later, however, an investor bought 38,000 VIX July 20 puts, a view that the index will settle below 20 at the July expiration. It is possible that one investor initiated both trades and was rolling out a bearish position in VIX from June to July.

Analyzing the ETF Market
US Natural Gas Fund SPDR Consumer Products Fund (XLP) was the subject of an interest trade Friday. Shares, which touched new 52-week highs of $34.62 Thursday, added 6 cents to $34.33 Friday and one investor apparently sold 27,000 July 31 puts on the ETF at 4 cents per contract to buy 27,000 July 36 calls at 4 cents. This July 31 ñ 36 bullish risk-reversal, at even money, appears to be a new position (because volume exceeds open interest in both contracts) and a view that XLP will continue its winning ways through mid-July. The ETF, which holds names like Coke (KO), Estee Lauder (EL) and Lorillard (LO), is up 5.5 percent year-to-date.

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

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 >