Thursday’s Bullish Trading
Verisign (VRSN), a Reston, VA telecommunications company, is down 49 cents to $45.05 and options volume on the stock is running 6.5X the daily average. 7,935 calls and 1,080 puts so far. The top trade is a 2000-contract block of May 50 calls for 50 cents per contact on the all-electronic International Securities Exchange. An investor bought the calls, to open, according to data from ISE. 3,370 contracts have now traded. May 50 calls on VRSN are almost $5, or 11 percent, out-of-the-money and expiring four weeks from tomorrow. Today’s interest in the contract comes ahead of the company’s April 25 earnings report.
Bullish trading was also seen in Vodafone (VOD), Pepsico (PEP), and Magnum Hunter Resources (MHR).
Thursday’s Bearish Trading
SAP might be a name worth watching Friday. The software-maker is due to release earnings before the bell and shares are trading up $1.27 to $78.15 ahead of the news. On the options front, a noteworthy trade is opened in SAP, as an investor bought the Jun 77.5 straddle on the stock for $7, 3000X, to open. That is, they bought 3,000 Jun 77.5 puts on SAP for $3.70 and bought 3,000 Jun 77.5 calls for $3.30. The straddle is not necessarily a bullish or bearish trade, but seems to be expressing the view that shares of SAP will see heightened volatility between now and the June expiration.
Bearish trading was also seen in Gerdau (GGB), Frontier Communications (FTR), and Comstock Resources (CRK).
Index Recap
CBOE Volatility Index (.VIX) continues its recent ascent. The market’s so-called “fear gauge” is up 1.56 to 18.07 and has rallied 6 points, or nearly 50 percent, on the week. The sharp uptick in the volatility index comes as the S&P 500 has suffered three rather substantial losses in the past four days. SPX fell 36.5 points Monday, dropped 22.5 yesterday, and is down 12.51 points to 1,599.50 today. VIX, which tracks the expected or implied volatility priced into SPX options, is moving higher in reaction to the increased market volatility. Meanwhile, trading in the options market has been brisk this week. Today, for example, projected volume is expected to be more than 20 million contracts. Investors often turn to the options product during periods of heightened volatility. This week is no exception to that rule.
Analyzing the ETF Market
SPDR Consumer Staples Fund (XLP) is off 8 cents to $40.38 and showing some resilience today on the heels of strong earnings from Pepsico (PEP). In options action, trading in XLP is interesting, as about 62,000 puts and 6,000 calls traded on the ETF. Volume in XLP May 40 puts is approaching 30,000 contracts. June 30, May 41, June 47 and May 38 puts are the next most actives and 30-day implied volatility in XLP options is up 12 percent to 14.5. Of the nine select sector funds, the consumer staples ETF has been one of the top performers in 2013. Some investors are possibly buying puts on the ETF after the run up on concerns about a possibly market decline in the weeks/months ahead.
———————————————————————————-
Disclaimers
This article is provided for informational purposes only. No statement in this article should be construed as a recommendation to buy or sell a security or to provide investment advice. The content provided has been obtained from sources deemed reliable but is not guaranteed as to accuracy and completeness. optionsXpress makes every effort to provide timely information to its recipients but cannot guarantee specific delivery times due to factors beyond our control.
Derivatives involve substantial risk and are not appropriate for all investors. Please read the “”Disclosure Statement for Futures and Options”” prior to investing in futures or options.
For investments using a straddle or strangle options strategy the potential loss is unlimited. Multi-leg option strategies are subject to multiple commissions. Profits may be eroded by the commission expended to open and close the positions and other risks apply.