Unusual Options Activity Review for Thursday, February 7, 2013
Thursday’s Bullish Trading
Waste Management (WM) saw an unusual amount of options activity Thursday. Shares of the Houston, TX company saw a midday advance and closed up 45 cents to $36.55. 22,000 calls and 1,765 puts traded on the stock, which is 4.5X the daily average for Waste Management. March 37 calls saw the most volume. Midday trades, when the stock was trading around $36.35, included two blocks of Mar 37 calls totaling 4,700 contracts for 33 cents per contact. Minutes later, the same calls were trading for 35 cents and then 45 cents per contract. At the end of the day, 14,291 traded against 3,323 in open interest and the market was 55 to 65 cents. It’s not clear what motivated the activity, as there were no obvious headlines on WM today. The company is due to release earnings on February 14.
Bullish trading was also seen in Marathon Petroleum (MPC), Coinstar (CSTR), and Southwest Airlines (LUV).
Thursday’s Bearish Trading
Virgin Media (VMED), which jumped more than 18 percent Tuesday on talks about a possible deal with Liberty Global (LBTYA), gained another $1.15 to $46.04 Thursday. Yet, options order flow doesn’t seem to reflect the same bullish sentiment, as one player bought 12,000 June 43 puts on VMED for $1.15 per contract. At the end of the day, nearly 14,000 contracts traded against 341 in open interest. Some investors might be taking positions in June 43 puts on VMED to help hedge shares after the big move or possibly on the view a deal won’t happen and the stock will forfeit some of its recent gains.
Bearish trading was also seen in Sandridge Energy (SD), O’Reilly Automotive (ORLY), and Lorillard (LO).
Index Recap
Overall options volumes were again very light in the index market Thursday. 479,000 calls and 600,000 puts traded on the S&P 500 Index (.SPX), CBOE Volatility Index (.VIX), and other cash indexes, which is only about 70 percent of the recent daily average volume, according to Trade Alert data. The S&P traded in a 14-point range and lost 2.73 points to 1,509.39. Meanwhile, VIX hit a morning high of 14.41, but gave up most of the gains and lost .09 to 13.50. Implied volatility was mixed across the market. VXN, which tracks the implied volatility of NASDAQ 100 (.NDX) options, rose .75 to 14.77. Implied volatility on Dow (.DJX) options, as measured by VXD, was up just .13 to 12.91. However, VXAPL and VXGS, which track the implied volatilities in Apple and Goldman options, respectively, ticked modestly lower.
Analyzing the ETF Market
iShares China Fund (FXI) is under pressure this week. The exchange-traded fund, which holds shares of 25 leading publicly traded Chinese companies, lost 94 cents to $39.52 and has now suffered a four-day 5.5 percent losing skid, after probing multi-year highs Friday. In options action, 50,000 calls and 89,000 puts traded on the ETF Thursday. The top trade was a 20,000-contract block of January 32 puts on FXI for $1.19 per contract when the market was $1.14 to $1.19. The hefty premium is possibly a hedge and designed to help protect a portfolio of Chinese stocks from further losses through the remainder of 2013. February 38 and 39 puts on FXI, which expire at the end of next week, were busy today as well.
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