Unusual Options Activity Review for Tuesday, December 18, 2012
Tuesday’s Bullish Trading
Ford Motor (F) added 28 cents to $11.67 in active trading of 59 million shares and investors were revved about the options on the automaker Tuesday. Volume was 2.5X the daily average, after 147,000 calls and 64,000 puts traded on Ford. January 12.5 calls were the most actives. 36,759 contracts traded. The Jan 12.5 call on F is 7.1 percent out-of-the-money and expiring in 31 days. Weekly 12 calls, which expire on January 4, were the second most actives. 35,979 contracts changed hands. The contract is 2.8 percent OTM and expiring in 17 days. It’s not clear what was motivating the higher share volume and increasing interest in short-term upside calls on Ford Tuesday. Some players might be looking for the stock to roll into 2013 on a strong note. But rather than buying shares outright, they’re taking positions in calls that give the right to buy (call) the underlying (100 Ford shares per 1 call option) for a set price (strike) for a set period of time (expiration date).
Bullish trading was also seen in Boyd Gaming (BYD), Murphy Oil (MUR), and Cypress Semi (CY).
Tuesday’s Bearish Trading
Ctrip.com (CTRP), the Chinese online travel company, was up 4.6 percent to $23.11 in active trading of 4.3 million shares after a firm upgraded the stock to OutPerform from Market Perform. Some options traders didn’t seem to share the optimistic view, as about 9,000 puts and 2,000 calls traded in Ctrip Tuesday. January 15 puts, which are 35 percent out-of-the-money and expiring in four and a half weeks, were the most actives in CTRP. 6,534 traded, including a 939-lot for 15 cents per contract when the market was 5 to 15 cents. Open interest is 10,456 and so some of the activity might be closing. To confirm, check the open interest numbers Wednesday. OI on individual options contracts is updated once per day and the numbers are provided in the options chains.
Bearish trading was also seen in Quicksilver Resources (KWK), Nokia (NOK), and RR Donnelly (RRD).
Index Recap
It was a busy day of trading in the CBOE Volatility Index (.VIX) pit ahead of the expiration Tuesday. Unlike equity options, which expire on the Saturday following the third Friday of the expiration month, VIX options expire on Wednesday. It is sometimes before, but sometimes after the standard expiration. This month, VIX options expire on December 19 and the last day to trade the December contract was Tuesday. 465,000 calls and 376,000 puts traded on the index. December 15 puts, December 16 puts, December 16 calls, and December 17 calls were the most actives. If Wednesday’s VIX settlement value is 16 or less, all of the December call options with strikes 16 or greater expire worthless. All of the puts with strike prices of 16 or less also expire worthless.
Analyzing the ETF Market
It was a rough day for the gold bugs, as the price of the yellow metal dropped $25 to $1693. Consequently, SPDR Gold Trust (GLD), which is an ETF that holds gold stored in bank vaults, dropped $2.36 to $162.08 per share. Bulls and bears in the options market seemed to be battling it out in GLD Tuesday, as an even split of put and call activity surfaced in the ETF. About 210,000 calls and 210,000 puts traded on the gold fund. While January 162, December 160 and December 162 puts were the most actives, January 166 and 167 calls on GLD saw active trading as well.
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