Unusual Options Activity Review for Wednesday, November 7, 2012
Wednesday’s Bullish Trading
CBS closed down 43 cents to $34.00 and options volume on the media giant was running 5X the daily average ahead of earnings, due out after the closing bell Wednesday. 19,000 calls and 3,365 puts traded in CBS and more than 70 percent of the flow was concentrated in November 35 calls on the stock. The action included a 15,000-contract block for 50 cents per contract. The hefty trade was bought-to-open, according to data from the options exchange. If so, it appears to be a bullish play heading into the report and a view that CBS moves beyond $35 by the expiration. If not, any premium paid is at risk if the contract expires worthless at the end of next week when November contracts come off the board.
Bullish trading was also seen in HMA, Covanta (CVA), and HCA.
Wednesday’s Bearish Trading
Ciena (CIEN) closed up $1.27 to $14.45, seizing higher ground today after AT&T updated its plans for future capital expenditures. Ciena, a networking company, generates about 15 percent of its revenues from Ma Bell. The stock was higher on the news, but order flow seems to reflect mixed sentiment. The largest trade in Ciena Wednesday is a 3,000-contract block of December 14 puts traded for 94 cents per contract when the market was 89 to 94 cents. The next biggest trades were blocks of January 10 and 15 puts. Roughly 10,000 puts and 9,500 calls traded in CIEN Wednesday, which is 4X the daily average.
Bearish trading was also seen in Hologic (HOLX), LG Display (LPL), and Computer Associates (CA).
Index Recap
CBOE Volatility Index (.VIX) closed up 1.50 to 19.08 following a 30-point slide in the S&P 500 Wednesday. Yet, volume in the VIX pit has been impressively light. 203,000 calls and 127,000 puts have traded in the volatility index so far, which is only about 70 percent the normal levels, according to Trade Alert data. In addition, some of the biggest trades in the index Wednesday seem to reflect a bearish view on volatility after one investor sold 10,000 November 20 calls on VIX at $1.15, bought 10,000 November 23 calls at 40 cents and bought 10,000 November 16 puts for 50 cents. That is, they sold the Nov 20 ? 23 call spread to buy downside December 16 puts. If opening, it’s bearish spread and one that makes its best profits if VIX settles well below 16 through the November expiration, which is two weeks from Wednesday.
Analyzing the ETF Market
While volume was light in the VIX pit, the SPDR 500 Trust (SPY) saw a flurry of activity Wednesday. Shares, which represent ownership in all of the S&P 500 companies, lost $3.24 to finish $139.72. Meanwhile, about 2.7 million calls and 1.4 million puts traded on the exchange traded fund Wednesday. SPY November 140 puts, which are now 28 cents in-the-money and expiring at the end of next week, were the most actives across the options market. More than 334,000 changed hands. November 139 puts, November 135 puts, and Weekly 141 puts on SPY were heavily traded as well and all traded more than 100,000 contracts. The heavy flow in these short-term put options seems to be a clear sign that levels of investor anxiety were elevated as stocks suffered a sizeable setback on Wednesday.
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