Unusual Options Activity Review: INTC, YHOO, HTZ, EP, UAL, DISH, NUAN, S, .SPX, .OEX, .VIX, VXX

Posted April 19th, 2012 by Joseph Cusick in Unusual Activity

Wednesday's Bullish Trading
Intel (INTC) was the subject of heavy trading Wednesday. Shares of the world's largest chipmaker lost 52 cents to $27.95 on heavy turnover of 72 million shares after the company reported better-than-expected first quarter profits, but some analysts expressed concerns about the company's second quarter guidance. Options volume on Intel surged to 6X the daily average. 460,000 calls and 200,000 puts traded in the name. One noteworthy trade was a seller of 60,000 July 23 puts on INTC at 23 cents per contract. The Jul 23 put is now 17.7 percent out-of-the-money and the investor might have sold the massive block on expectations Intel will hold above $23 now that the earnings risk has passed. Meanwhile, July 30 and 31 calls were the most actives in Intel Wednesday. Some investors might have been buying the July 30 ñ 31 call spread on hopes the stock may continue to rally through mid-July. Although INTC was down on earnings Wednesday, it is already up 19 percent so far in 2012.

Bullish trading was also seen in Yahoo (YHOO), Hertz (HTZ), and El Paso (EP).

Wednesday's Bearish Trading
United Airlines (UAL) edged up 3 cents to $22.70 on relatively light volume of 6.3 million shares. Meanwhile, 16,000 puts and 7,000 calls traded on the airliner, which is 2.5X the daily average for the name. The top trades of the day were part of a spread, in which the investor apparently bought 4,000 May 20 puts on UAL for 38 cents and sold 4,000 May 18 puts at 15 cents. The May 18 ñ 20 put spread, for 23 cents, looks like a new position and possibly designed to help hedge a stock position. The spread will offer its best payoff if shares fall to $18 through the May expiration, which represents a 20.7 percent slide over the next 30 days. Earnings are expected later this month.

Bearish trading was also seen in DISH Network (DISH), Nuance (NUAN), and Sprint (S).

Index Recap
Trading was active in the index market Wednesday and heading into the April expiration. 863,000 puts and 623,000 calls traded on the S&P 500 Index (.SPX), the S&P 100 Index (.OEX), and other cash indexes. The S&P 500 lost 5.64 points to 1,385.14 and CBOE Volatility Index (.VIX), which tracks the implied volatility index of SPX options, ticked .18 higher to 18.64. VIX May 25 and 30 calls were the most active index contracts on the day, as some investors might have been buying upside calls on the index to hedge the risk of increasing volatility over the next few weeks. April options on the index expired Wednesday and the settlement value was 19.06. The last day to trade most other April index options is Thursday and settlement values are computed Friday morning.

Analyzing the ETF Market
iPath S&P 500 Short Term VIX Futures Fund (VXX) edged 26 cents higher to $18.25 and 72,000 calls and 160,000 puts traded in the product. The top trade of the day in VXX options was a spread, in which the investor apparently bought 15,000 May 15 puts on the fund for 35 cents and sold 15,000 May 14 puts at 15 cents. If opening, this May 14 ñ 15 put spread, for a 20-cent debit, is a bearish view on volatility. It offers its best payout if VXX falls to $14 or more through the May expiration, which represents a 23.3 percent slide over the next 30 days. VXX has been grinding higher off late-March lows of $15.57 per share, but is still well below the levels seen in October, when shares fetched more than $59.
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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.

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