Unusual Options Activity Review for Tuesday, November 20, 2012
Tuesday’s Bullish Trading
Options on Research In Motion (RIMM) were busy for a second day. 95,000 calls and 42,000 puts traded on the Blackberry-maker Monday, which is 2.5X the daily average volume. The stock closed up 12 cents to $9.70 Tuesday in brisk trading of over 97 million shares on the heels of an analyst upgrade. Options volume was again 2.5X the daily average. More than 150,000 options traded on RIM, including 113,000 calls and 39,000 puts. Some players seem to be anticipating additional gains later this week, as the Weekly (expiring 11/23) $10 calls were the most actives in the name. 18,354 traded against 10,633 in open interest. If the stock holds below $10 through the end of business Friday, the contract expires worthless. In addition, since Thursday is a holiday and Friday only a half day, there are now just one and a half trading days until the weekly 11/23 contracts expire.
Bullish trading was also seen in Mosaic (MOS), Green Mountain Coffee Roasters (GMCR), and Informatica (INFA).
Tuesday’s Bearish Trading
JC Penney (JCP), which had a one-month 42.4 percent loss on concerns about the retailer’s slowing sales heading into the pivotal holiday shopping season, closed up 49 cents to $17.49 in active trading of more than 15 million shares Tuesday. Meanwhile, 34,000 calls and 31,000 puts have traded on the stock. While some investors are possibly taking positions on hopes for a rebound in JCP heading into Black Friday sales (Dec 20 calls and Weekly 17.5 calls are among the most actives in the name), the top trade in the options on the stock Tuesday was a 10,000-contract block of January 2014 puts at the $10 strike for $1.39 per contract on the International Securities Exchange. An investor bought the deep out-of-the-money [DOOM] puts, to open a new position, according to data from the exchange. If so, the activity seems to reflect concerns that JCP might drop to less than $10 by early-2014.
Bearish trading was also seen in Teavana (TEA), Cigna (CI), and International Game Technology (IGT).
Index Recap
CBOE Volatility Index (.VIX) ticked down .16 to finish 15.08 and trading was active in the VIX pit due to the expiration. November 2012 options on the index cease trading Tuesday before a settlement value is computed Wednesday morning. 240,000 calls and 332,000 puts have traded on the index. November 18, 15, and 16 puts were the most actives. Some investors are probably closing out some positions on uncertainty regarding Wednesday’s settlement print. Open interest in VIX November options was a whopping 3.24 million contracts. Of that, an impressive 2.21 million contracts (or 68.2%) were out-of-the-money calls with a strike price greater than 16. All of those (which are not offset Tuesday) will expire worthless if the settlement is less than 16.
Analyzing the ETF Market
SPDR Retail Trust (XRT) lost 15 cents to finish $61.70. Earlier Tuesday an investor initiated a hefty four-way spread on the exchange-traded fund. They sold 25,000 December 60 puts on XRT at 83 cents, bought 25,000 December 56 puts for 17 cents, bought 25,000 January 62 puts for $2.34 and sold 25,000 January 58 puts at 81 cents. In other words, they sold the Dec 56 ? 60 put spreads on XRT at 66 cents and bought the Jan 58 ? 62 put spread for $1.53. They paid a net debit of 87 cents for the four-way and were probably closing out a position in the December contracts, while opening a new bearish play in January. If so, they’re extending a bearish view on the retail sector and possibly looking for the group to come under pressure through Black Friday and the holiday shopping season.
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