Monday’s Bullish Trading
Peabody Energy (BTU), a St. Louis, MO coal producer, bucked the bearish trend and finished the day up 28 cents to $22.12 in active trading of 9 million shares. Meanwhile, 28,000 calls and 5,200 puts traded on the stock, which is more than 2X the daily average. April 25 calls, which are 13 percent out-of-the-money and expiring in 32 days, were the most active in BTU. More than 6,000 traded. April 24, July 27, July 25, Apr 23 and Apr 22 calls were the next most actives in the stock and 30-day implied volatility in the stock was up 7.5 percent to 38. It’s not clear what motivated the increased activity, as there were no obvious company specific headlines in the stock today. It might have been in reaction to an analyst upgrade. Nomura raised their rating on BTU today to Neutral from Reduce.
Bullish trading was also seen in Conoco (COP), Starbuck’s (SBUX), and International Paper (IP).
Monday’s Bearish Trading
Kimberly Clark (KMB) shares dropped 36 cents to $92.90 and options on the Dallas, TX personal products company were busy today after Goldman Sachs downgraded the stock to Sell from Neutral. 14,000 puts and 2,430 calls traded on KMB today. April 85 puts, which are now 8.5 percent out-of-the-money, were the most active. 5,200 traded. April 80, 82.5 and 90 puts were the next most actives in Kimberly Clark today and 30-day implied volatility was up 6 percent to 16.
Bearish trading was also seen in JDS Uniphase (JDSU), Juniper Networks (JNPR), and Colgate Palmolive (CL).
Index Recap
Implied volatility was broadly higher across the options market after reaching low levels last week. For example, CBOE Volatility Index (.VIX), which tracks the expected or implied volatility priced into S&P 500 Index (SPX) options, fell to 5-year lows of only 11.05 last week. VIX was up 2.06 to 13.36 points today. Meanwhile, trading in the options on the volatility index was active today. 600,000 calls and 320,000 puts traded in the VIX pit, according to Trade Alert data. The biggest trades were part of a spread after an investor bought 107,000 VIX April 20 calls on the index for 53 cents and sold 107,000 VIX April 25 calls at 25 cents. The spread, for 28 cents, was possibly initiated as a type of hedging strategy against a stock portfolio on worries market volatility might continue to climb in the weeks/months ahead.
Analyzing the ETF Market
Options volume picked up in the Market Vectors Russia Fund (RSX). Shares dropped 92 cents to $27.96 on concerns about the crisis facing Cyprus, which announced plans to tax bank account deposits to help finance a bailout. Many Russian individuals and businesses have large deposits held in Cyprus banks. Consequently, RSX, which holds shares of leading Russian companies, slipped along with Russia’s equity markets Monday and options volume was 2.5X the daily average. 7,400 puts and 2,000 calls traded on the ETF. May and August 27 puts were the most actives.
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