Unusual Options Activity Review: PBI, C, GRPN, CJES, STP, FTNT, BLK, BRMN, .SPX, .OEX, .V IX, BAC, XLF
Monday's Bullish Trading
Pitney Bowes (PBI) adds 79 cents to $13.74 in active trading of 5.8 million shares and saw a long-awaited bounce after a brutal ten-day 25.4 percent slide. The provider of mail processing equipment and solutions slipped 4.6 percent on May 8 after earnings were reported and continued falling to new 52-week lows of $12.81 Friday. The stock is up 7.3 percent off those lows, however, and the options order flow in PBI today seems to reflect expectations for additional gains. 9,450 calls and 970 puts traded on the stock, a ratio of almost ten-to-one. January 15 calls, which are 9.2 percent out-of-the-money, were the most actives. June and July 14 calls were the next most actives, as some investors were possibly buying upside calls on the stock on expectations shares might recover some of the steep losses in the weeks/months ahead. The stock also has a high short interest (to float) ratio of 29 percent. Some short sellers might be buying calls to hedge the recent gains in their short positions.
Bullish trading was also seen in Citi (C), Groupon (GRPN), and C&J Energy Services (CJES).
Monday's Bearish Trading
Suntech Power (STP) edged up 3 cent to $2.03 and options volume on the solar power company hit 3.5X the daily average after 770 calls and 12,000 puts traded on the stock. January 2 puts, which are now at-the-money, were the most actives. 8,502 changed hands and 58 percent of the trades were initiated at the offer, which indicates buying interest. Jan 2.5 puts were the next most actives. 1,427 traded. Implied volatility was up 2 percent and is elevated at 103 after the stock's two-month 43.1 percent skid. STP has lost more than three-quarters of its value from the highs seen a year ago. The options action seems to reflect concerns about additional losses heading into a May 23 earnings report.
Bearish trading was also seen in Fortinet (FTNT), Blackrock (BLK), and BioMarin Pharmaceuticals (BRMN).
Volume was light and volatility eased Monday. 630,000 calls and 756,000 puts traded on the S&P 500 Index (.SPX), the S&P 100 Index (.OEX), and other cash indexes, which not light volume, but it is well off the pace seen last week. The S&P 500 Index rallied 20.77 points to 1,315.99 and CBOE Volatility Index (.VIX), which tracks the implied volatility priced into S&P 500 Index (.SPX), lost 3.09 to 22.01. Levels of investor anxiety seem to have eased to start the week, but it was a slow news day with little new information to drive volume. A more telling sign will be the reaction to economic data later this week, including Existing Homes Sales tomorrow, New Home Sales Wednesday, and Durable Goods Thursday. Then, attention is likely to turn to the three-day Memorial Day weekend, with the possibility of slow market action Friday ahead of the break.
Analyzing the ETF Market
SPDR Financials (XLF) lagged Monday, as both BofA (BAC) and JP Morgan fell nearly 3 percent. XLF, which holds all of the financial-related names from the S&P 500 added 13 cents to $13.90. Options volume totaled 69,000 calls and 164,000 puts, which is well of the frantic pace seen late last week. The top trades were part of a spread, in which the investor bought 20,000 January 13 puts on XLF for $1.04 and sold 20,000 January 11 puts at 50 cents. The Jan 11 ñ 13 put spread, for a 54-cent debit, is a new position, according to data from the options exchange. If so, it is a bearish play that will offer its best payout if shares tumble to $11 (20.9 percent) or more through the January 2013 expiration. XLF is already 13.2 percent off its March highs.
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