Monday’s Bullish Trading
Aetna (AET) is up 72 cents to $44.26 ahead of an October 25 earnings report and also ahead of tonight’s Presidential debate. Although the topic of tonight’s discussion is foreign policy, the outcome of the debate could potentially shape the Presidential race, which in turn has implications for health insurance companies like Aetna. Some investors might be anticipating favorable developments for AET, as the stock was ticking higher and call options on the stock were busy today. The largest trade on the health insurance company today was an 8,600-contract block of November 45 calls for $1.12 per contract on the International Securities Exchange. Data from the ISE reports an investor bought the block, to open a new position. At the end of the day, 16,480 November 45 calls traded on Aetna.
Bullish trading was also seen in United Health (UNH), Peabody Energy (BTU), and Ann Taylor (ANN).
Monday’s Bearish Trading
United Technologies (UTX) might be a name worth watching Tuesday morning. The company reports earnings. The stock, which is a member of the Dow Jones Industrial Average, was down 16 cents to $77.83 today ahead of the news and options volume was 8X the daily average, driven by a large put butterfly spread. In this advanced options play, the investor bought 12,000 November 75 puts on the stock for 78 cents, sold 24,000 November 72.5 puts at 35 cents, and bought 12,000 November 70 puts for 18 cents. The Nov 70 ? 72.5 ? 75 put butterfly spread appears to be a new position because volume exceeds open interest in all three contracts. If bought, the spread has a bearish payoff chart with a max profit if UTX falls to $72.5 (middle strike or “body” of the fly) through the November expiration.
Bearish trading was also seen in Gentex (GNTX), Overseas Shipholding (OSG), and Thompson Creek (TC).
Index Recap
Overall options volumes slowed from the brisk pace seen last week, which was partly driven by the options expiration and also motivated by the market’s steep fall Friday. Total volume across the CBOE Volatility Index (.VIX) the S&P 500 (.SPX) and other cash indexes was 557,000 calls and 610,000 puts. The volume, of 1.17 million contracts, is about 11 percent below the recent daily average, according to Trade Alert data. Meanwhile, VIX lost .44 to 16.62 and November 25 calls, which also saw a flurry of activity last week, were the most actives in the index market today. 37,444 contracts changed hands on the day.
Analyzing the ETF Market
November 17 call options on the SPDR Financials (XLF) were today’s most actively traded options contract. XLF is an exchange-traded fund that holds all of the financial-related names from the S&P 500 and finished unchanged at $16.11 Monday. On the options front, volume in the November 17 calls on the ETF approached 250,000 contracts. More than half of the flow was driven by a buyer of 125,000 contracts for 6 cents each. If bought-to-open, the large block of calls seems to be rather aggressive view on the financials. Nov 17 calls on XLF are 5.5 percent out-of-the-money and expiring in 25 days.
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