Options Order Flow Summary & Unusual Activity Alert: USEC Inc (USU), Career Education Corp (CECO) & Corinthian Colleges Inc (COCO)
General Sentiment
US markets followed the global lead with an immediate decline of nearly 3.5% on the open. The Dow Industrials plunged more than 450 points just 5 minutes into the trading day. An impressive bounce quickly followed and the markets are currently down less than 1%.
The early chaos lifted the CBOE VIX to a brief peak above 37.50, but that level quickly faded as the sense of panic left the market. At mid-afternoon, the VIX is currently up 3.4 points to 30.60.
USEC Inc (USU) $7.30 -2.54%
An early block traded in this uranium supplier today. An institutional client appears to have sold more than 23,000 of the Feb 7.5 calls on the ISE at $.40 to establish a new short position.
The stock is near its 52-week lows and the initiator of this trade may be replacing short calls that expired with the January options on Friday.
Career Education Corp (CECO) $15.83 -20.61% and
Corinthian Colleges Inc (COCO) 7.51 -31.04%
Both online educators are getting hit today on a negative pre-announcement from COCO and educational loan fallout related to the credit crisis. CECO has traded 7 times its normal volume levels, with a bearish bias to the much of the flow. Straddle sellers appear to be settling in for a range-bound future.
The largest trade involved a ratio trade on the AMEX in which the Feb 17.5 puts were sold 1,500 times for $1.15 against a buy of 3,500 Feb 15 puts for $.55. The small net credit trade provides a payoff if the stock stays near current levels or suffers considerably and trades down to 50% of current levels.
COCO has traded 9 times its normal volume with option flow dominated by put buyers who are lifting virtually every put strike available. This buying activity is possibly in anticipation of a hard-to-borrow situation for the stock. The most active options include the Feb 12.5 puts, with more than 2,100 trading and 68% of those contracts trading offer-side.
COCO option volume also spiked last Monday when almost 3,000 Feb 12.5 puts traded for prices near $1. ISE sentiment data shows that 94% of the flow consisted of opening customer transactions. With current prices near $5.00, an outright buyer would be looking at a one-week profit of $1.2 million.
Posted By: Trade Alert
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About Henry Schwartz
Henry Schwartz has traded derivatives on US and European exchanges for nearly 20 years. His experience includes market-making and institutional trading at the Hull Group, Salomon Brothers, Bear Stearns and most recently Banc of America Securities, where he led the electronic market-making project coincident with the launch of the ISE. His current work involves real-time stream analysis of options market activity for a number of leading institutional sell-side firms.
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