Wednesday’s Bullish Trading
Zynga (ZNGA) might be a name worth watching later Wednesday. The San Francisco, CA Internet and social media company is due to report earnings after the close and trading in the stock is heavy ahead of the news. ZNGA is up 2 cents to $3.20 into the final stretch of today’s session and volume is approaching 20 million shares. Meanwhile, 27,000 calls and 18,000 puts traded in the name. May 3.5 calls, which are 30 cents or 9.4 percent out-of-the-money and expiring in 23 days, are the most active in ZNGA so far. 8,680 contracts traded. Another 8,655 Weekly 3.5 calls (expiring at the end of this week), also traded in ZNGA. Meanwhile, one of the top trades is a 1000-contract block of Jun 2.5 puts that traded at 6 cents per contract on the International Securities Exchange. An investor sold the puts, to open, according to ISE data. 3,730 Jun 2.5 puts now traded in ZNGA, making it the third most active option in the stock. Downside put writing and high volume in upside calls on Zynga seems to be reflecting some investor confidence in the stock ahead of the earnings results.
Bullish trading was also seen in Kinder Morgan (KMI), CF Industries (CF), and Silicon Image (SIMG).
Wednesday’s Bearish Trading
Corning (GLW) August 14 calls are the most active equity options today in the wake of the company’s earnings report. Shares of the specialty glass-maker are up 71 cents to $13.84 and, in morning trading, a block of 62,000 August 14 calls trades on the stock at 49 cents per contract when the market was 51 to 54 cents. The big trade (which printed below the market’s bid price) is somewhat unusual and appears to be an opening call write ? maybe against a position in shares or part of a covered call. If so, the call writing is not necessarily bearish activity, but seems to express the view that GLW will see limited upside through mid-August. More than 66,000 August 14 calls now traded on the stock.
Bearish trading was also seen in Forest Labs (FRX), Zillow (Z), and JDS Uniphase (JDSU).
Index Recap
Overall volumes in the index market are light today, as the focus seems to be primarily on mixed earnings news and away from headlines on the macro front. The S&P 500 Index (.SPX) has traded in a narrow 7 point range and is up 3.36 points to 1,582.16 heading into the final hour. 209,000 calls and 281,000 puts traded on SPX, which is only about 70 percent the normal levels, according to Trade Alert. Meanwhile, CBOE Volatility Index (.VIX), which tracks the implied volatility priced into S&P 500 index options, is drifting in lifeless action and was recently down .07 to 13.41. 235,000 calls and 102,000 puts traded in the VIX pit, which is only 65 percent the normal levels and a far cry from a week ago, when almost 1 million contracts traded on the volatility index last Wednesday.
Analyzing the ETF Market
PowerShares QQQ (QQQ) is up 18 cents to $69.93 and an interesting trade on the ETF Wednesday is a May 68 ? 71 strangle, sold at 79 cents, 11500X. According to a source on the exchange-floor, an investor sold 11,500 May 68 puts on QQQ at 51 cents per contract and sold 11,500 May 71 calls at 28 cents. With QQQ shares trading roughly midway between the two strikes, the strangle write possibly reflects the view that shares will hold in range between $68 and $71 through the May expiration, which is in three-and-a-half weeks. Overall trading is brisk in both contracts. In fact, volume in QQQ May 71 calls is almost 70,000, making it one of the most actives in the options market today. QQQ is an exchange-traded fund designed to mirror the performance of the NASDAQ 100, which in turn holds the largest non-financial names from the NASDAQ Stock Market.
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