Unusual Options Activity Review for Thursday, December 27, 2012
Thursday’s Bullish Trading
Forest Oil (FST), a Denver, CO oil and gas company, lost 7 cents to $6.61 and is on a five-day 8 percent losing skid. Some investors are possibly bracing for a rebound, as 8,445 calls and 511 puts traded on the stock Thursday. May 8 calls, which are 21 percent out-of-the-money, were the most actives. 5,182 contracts traded against 118 in open interest. The top trade was a 700-contract block for 60 cents per contract when the market was 55 to 60 cents. January 6 and February 8 calls on Forest Oil also saw interest and 30-day implied volatility in FST options was up 8 percent to 61.
Bullish trading was also seen in Nordstrom (JWN), Sandridge Energy (SD), and Newmont Mining (NEM).
Thursday’s Bearish Trading
Gannett (GCI) drops 25 cents to $17.91 and options volume on the McLean, VA newspaper publishing company was 7.5X the daily average, with 8,911 puts and 739 calls traded in the name. Much of the flow was concentrated in February 17 puts and included a 3400-contract block for 78 cents per contract when the market was 70 to 80 cents. At the end of the day, 7,849 contracts traded against 0 in open interest. It’s not clear what was motivating the activity, as there have been no obvious headlines on the ticker lately. Yet, implied volatility in GCI options was up 10 percent to 31.5 and some investors are possibly opening put positions on concerns about a drop in the stock between now and mid-February.
Bearish trading was also seen in Travelers (TRV), Knight Trading (KCG), and Assured Guaranty (AGO).
Index Recap
CBOE Volatility Index (.VIX) had a roller coaster day Thursday. The index, which was up 1.32 points the day before, opened at 19.39 and slipped to 19.18 in morning action. From that point forward, the index started a rather steep ascent before hitting 20.9 midday and its highest levels since late-July ? when it briefly touched 21 on 7/24. However, the gains didn’t hold and VIX started falling in the second half of trading. At the closing bell, VIX was down .16 to 19.32 and 8.2 percent from session highs. VIX tracks the expected volatility priced into the S&P 500 Index (.SPX) options. So, not only are fiscal cliff headlines driving roller coaster action in the stock market averages, they seem to be having a substantial impact on activity in the options market as well.
Analyzing the ETF Market
After several days of light volume, a flurry of activity surfaced in the SPDR 500 Trust (SPY) Thursday. Shares ended a volatile trading session down 19 cents to $141.56. Trading was a heavy 160.9 million shares. Meanwhile, 1.2 million calls and 2 million puts traded on SPY. Weekly 141 puts (that expire on Friday, Jan 4), were the day’s most active options contract. 146,663 contracts traded. The December Quarterly 141 puts, which expire on Monday, Dec 31, were the second most actives. 111,476 contracts changed hands. Some investors were possibly taking positions in these downside near-the-money short-term put options on concerns about further losses for the S&P 500 in the days ahead. SPY is an exchange-traded fund that holds the same names as the S&P 500 Index.
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