Unusual Options Activity Review for Tuesday, November 13, 2012
Tuesday’s Bullish Trading
Research In Motion (RIMM) lost 41 cents to $8.40 after the company announced a January 30 date for an event to launch Blackberry 10. Options volume on the mobile device-maker was 3X the daily average. About 99,000 calls and 45,000 puts traded on the stock. The top trades were part of a spread in which the investor was apparently selling 18,335 November 7 calls on RIM at $1.43 and buying 18,442 Dec 7 calls for $1.67. A bit later, another 14,720 Nov 7 calls traded at $1.43 and 14,277 Dec 7 calls for $1.67. Open interest in Nov 7 calls on the Blackberry-maker is currently 45,015 and the largest block of OI in the options on RIM. Therefore, Tuesday’s activity might offset some of those open positions ahead of the expiration. Rather than exercising the in-the-money calls and buying RIM (100 shares per call option) for $7 per share, they appear to be closing the options through an offsetting trade. Now, they are also opening a new similar position in the December 7 calls on RIM.
Bullish trading was also seen in Focus Media (FMCN), Macy’s (M), and Valeant Pharmaceuticals (VRX).
Tuesday’s Bearish Trading
JC Penney’s (JCP) woes continued for another day. After falling 4.8 percent Friday on earnings news and nearly 13 percent Monday, shares of the retailer gave up another 57 cents to $17.40 in active trading of 17 million shares. JCP has now dropped more than 40 percent in less than two months. The volatility is being driven by concerns the retailer’s latest business strategy is failing to stem slowing sales heading into the pivotal holiday shopping season. Trading in the options on the stock remains active as well. Another 55,000 puts and 31,000 calls traded in JC Penney Tuesday. November 17 puts, which are now 2.3 percent out-of-the-money and expiring at the end of this week, were the most actives. 24,575 contracts traded on the day.
Bearish trading was also seen in MetroPCS (PCS), AK Steel (AKS), and MBIA (MBI).
Index Recap
Options on the CBOE Volatility Index (.VIX) were busy Tuesday. After falling 1.93 points to 16.68 Monday, the market’s “fear gauge” finished down .03 to 16.65, even after the S&P 500 Index (.SPX) lost 5.5 points to 1,374.53. VIX typically ticks higher when the market heads lower. Yet, while VIX was little changed, some players in the options market seem to be bracing for a big move in the weeks/months ahead. About 600,000 calls and 151,000 puts traded on the index Tuesday. January 25, December 32.5, and January 35 calls were the most actives in VIX. Even deep out-of-the-money December 55 calls saw interest. More than 23,000 contracts traded.
Analyzing the ETF Market
Overall options volumes were light Tuesday. In the exchange-traded funds, for example, about 2 million calls and 2.8 million puts traded on the SPDR 500 Trust (SPY), iShares Russell 2000 (IWM), PowerShares QQQ (QQQ) and other ETF products, which is only about 87 percent of the recent daily average volume, according to Trade Alert data. Volumes are likely to pick up later in the week, however, because of the expiration. The last day to trade many November options on index products is Thursday. The last day to trade November ETF and equity options is Friday.
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