Unusual Options Activity Review for Friday, December 7, 2012
Friday’s Bullish Trading
TIVO added 12 cents to $12.10 and notched 52-week highs amid increasing options action. Roughly 17,000 calls and 2,685 puts traded on the stock. May $14 calls were the most actives and saw volume of 8,670 contracts against 1,249 in open interest. Barron’s Online Tech Daily blog had an article Thursday noting that Google and TIVO have a May court date related to a patent dispute. The focus on the May upside calls on TIVO might be a play on the favorable decision for the digital video recording device-maker. Jan 12.5 calls on TIVO were also busy Friday. 5,300 contracts traded.
Bullish trading was also seen in Walter Energy (WLT), Groupon (GRPN), and Marathon Petroleum (MPC).
Friday’s Bearish Trading
Focus Media (FMCN) shares fell Friday, but finished well off session lows. The stock came under fire and hit a low of $22.58 after Reuters reported that private equity firm CDH has pulled out of a consortium that was looking to buy the Chinese online advertising company. Shares rebounded somewhat in the afternoon session and lost 63 cents to $24.12. On the options front, put volume outpaced call volume by a ratio of two-to-one after 42K puts and 21K calls traded in the name. December 22 puts, which expire in 2 weeks, were the most actives. More than 8,000 traded. Meanwhile, implied volatility in FMCN options was up 68 percent to 55.
Bearish trading was also seen in Owens Illinois (OI), Tellabs (TLAB), and MetroPCS (PCS).
Index Recap
Overall volumes in the index market were slow throughout the week and volatility was little changed. The S&P 500 Index (SPX) added 4.13 points to 1,418.07 Friday and after a very choppy week of trading finished up less than two points from a week ago. Meanwhile, CBOE Volatility Index (.VIX), which tracks the expected or implied volatility of SPX options, finished down .68 to 15.90 Friday. VIX was practically unchanged on the week. The index is sometimes called the market’s “fear gauge” because it moves higher during times of fear and anxiety on the Street. So far, there’s been little overall movement in the index in December and therefore few fiscal cliff fears reflected in the VIX index, for now.
Analyzing the ETF Market
SPDR Basic Materials (XLB), which has been among the worst performers among the 9 sector funds since the election along with the SPDR Energy Fund (XLE), edged 30 cents higher to $36.05 and more than 31,000 puts traded on the ETF Friday. Much of the flow was due to one spread trade in the morning when an investor bought 8,000 January 35 puts on XLB for 69 cents and sold 16,000 January 32 puts at 14 cents. This 1X2 traded on the International Securities Exchange and data from ISE is indicating an opening purchase. That is, the investor bought 8,000 of the higher strike and sold 16,000 of the lower strike, setting up a bearish play that offers its best payoff is if shares fall to $32 over the next six weeks. The debit is at risk if share hold above $35 and the puts expire worthless, and there’s additional risk to the downside because not all of the lower strikes are covered by the higher strike puts.
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